Operations Research F-QAM201 Final

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Operations Research
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© Amity University Press
All Rights Reserved
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No parts of this publication may be reproduced, stored in a retrieval system or transmitted
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise
without the prior permission of the publisher.
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Advisory Committee
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Chairman : Prof. Abhinash Kumar
Members : Prof. Arun Bisaria
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Dr. Priya Mary Mathew
Mr. Alok Awtans
Dr. Coral J Barboza
Dr. Monica Rose
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Mr. Sachit Paliwal
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Subject Matter Expert

Mr. Sunil Kumar
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Published by Amity University Press for exclusive use of Amity Directorate of Distance and Online Education,
Amity University, Noida-201313
Contents
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Page No.
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Module - I: Introduction to Operations Research (OR) 01
1.1 Definitions of Operations Research,
Features of OR and Its Approach to Problem Solving
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1.1.1 Definitions of Operations Research
1.1.2 Features of OR
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1.1.3 OR and Its Approach to Problem Solving
1.2 Models and Modeling in OR; Methods for Solving OR Models
1.2.1 Models and Modeling in OR
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1.2.2 Methods for Solving OR Models
1.3 Phases of OR Approach to Problem Solving
1.3.1 Phases of OR Approach to Problem Solving
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1.4 Application Areas of OR
1.4.1 Application Areas of OR
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1.4.2 Uses, Scope and OR in Managerial Decision Making
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1.4.3 Decision Making under Uncertainty
Module - II: Linear Programming 35

2.1 Linear Programming (LP) and Allocation of Resources,
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Structure of LP Model, Advantages, Assumptions and Limitations of LP Model

2.1.1 Linear Programming (LP)
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2.1.2 Allocation of Resources in LP

2.1.3 Structure of LP Model
2.1.4 Advantages of LP
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2.1.5 Assumptions and Limitations of LP Model

2.2 LP Model Formulation with Examples
2.2.1 LP Model Formulation with Examples
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2.3 Graphical and Simplex Method for Solving LP Model

(Up to Three Variables – Only Maximization)
2.3.1 Graphical Method for Solving LP Model (Only Maximization)
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2.3.2 Simplex Method for Solving LP Model

2.4 Dual of LP Model and Its Economic Interpretation
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2.4.1 Dual of LP Model

2.4.2 Economic Interpretation of Dual
2.5 Standard Results on Duality; Managerial Significance of Duality
2.5.1 Standard Results on Duality
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2.5.2 Managerial Significance of Duality
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Case Study
Module - III: Sensitivity Analysis 81
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3.1 Changes in Objective Function, Availability of Resources and Input-Output Coefficients
3.1.1 Changes in Objective Function
3.1.2 Availability of Resources
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3.1.3 Input-Output Coefficients
3.2 Addition of an Additional Variable and Constraint
3.2.1 Addition of an Additional Variable
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3.2.2 Addition of a Constraint
3.2.3 Relationship to the Dual
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Case Study
Module - IV: Transportation Model 113

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4.1 Mathematical Model of Transportation Problem;
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Feasible Solution Methods: Northwest Method, Lowest Cost Method and Vogel’s Method
4.1.1 Introduction to Transportation Problem
4.1.2 Feasible Solution Methods: Northwest Method
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4.1.3 Feasible Solution Methods: Lowest Cost Method

4.1.4 Feasible Solution Methods: Vogel’s Method
4.2 Optimal Solution: Modified Distribution (MODI) Method
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4.2.1 Optimal Solution: Modified Distribution (MODI) Method

4.3 Unbalanced Transportation Problem and Its Solution
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4.3.1 Unbalanced Transportation Problem

4.3.2 Unbalanced Transportation Problem and Its Solution
4.4 Degeneracy and Its Resolution; Multiple Optimal Solutions; Maximization Transportation Problem
4.4.1 Degeneracy
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4.4.2 Degeneracy Resolution

4.4.3 Multiple Optimal Solutions
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4.4.4 Maximization Transportation Problem

Case Study
Module -V: Assignment Model 151

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5.1 Mathematical Model of Assignment Problem

5.1.1 Mathematical Model of Assignment Problem
5.2 Hungarian Method for Solving Assignment Problem
5.2.1 Hungarian Method for Solving Assignment Problem
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5.3 Unbalanced Assignment Problem and Its Solution
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5.3.1 Unbalanced Assignment Problem
5.3.2 Unbalanced Assignment Problem Solution
5.3.3 Restricted Path Problem
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5.4 Multiple Optimal Solutions, Maximization Assignment Problem
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5.4.2 Maximization Assignment Problem
5.5 Restrictions on Assignment; Travelling Salesman Problem
5.5.1 Restrictions on Assignment
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5.5.2 Travelling Salesman Problem
Case Study
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Operations Research 1
Module - I: Introduction to Operations Research (OR)

Notes
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Learning Objectives:
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At the end of this module, you will be able to understand:
●● Concepts of Operations Research
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●● Features of Operation Research
●● Usage of Operation Research in problem solving
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●● Models of Operation research
●● Various methods for solving operation research problems
●● Phases of operation research approach
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●● Application of operation research in various areas
●● Uses, Scope and OR in Managerial Decision Making
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●● Decision Making under Uncertainty
Introduction
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Operations research (OR) is a problem-solving and decision-making analytical
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approach that is beneficial in business management. Problems are broken down into
simple components in operations research, and then mathematical analysis is used to
answer them in predetermined phases.
“Operational research” is a word used by the British and Europeans, while

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“operations research” is used by the Americans; nonetheless, both terms are often
abbreviated to “OR,” which is the phrase we shall use.
The phrase “management science” is also used to describe this area (“MS”). The
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names “OR/MS” or “ORMS” are occasionally used interchangeably in the United States.
“Industrial engineering” (“IE”) and “decision science” are two additional names that are
occasionally used (“DS”). In recent years, there has been a push for the discipline to be
standardised under a single title, notably “OR.”
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Operational Research is a rather recent field. The OR’s contents and bounds have
yet to be determined. As a result, providing a formal definition of the phrase Operations
Research is challenging.
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When mathematical and quantitative approaches are utilised to support a choice,

the OR process begins. A manager’s primary responsibility is to make decisions. We
make choices in our everyday lives without even realising it. In basic circumstances,
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judgments are made only on the basis of common sense, judgement, and skill, without
the use of any mathematical or other model. However, the choice we’re talking about
is complicated and carries a lot of weight. Planning a public transportation network in
a city with its unique layout of industries, residential blocks, or determining the best
product mix when there are a big number of items with various profit contributions and
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production requirements, to name a few examples.
Amity Directorate of Distance & Online Education

2 Operations Research
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A historical perspective
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While there is no definitive date for the genesis of O.R., it is widely assumed that
it began in England during World War II. The development of radar defence systems
for the Royal Air Force sparked its inception, and the term “operational research” was
coined by a British Air Ministry official named A. P. Rowe, who formed teams to conduct
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“operational researches” on a British radar station’s communication system and control
room. The research were aimed at increasing system operating efficiency (an objective
which is still one of the cornerstones of modern O.R.). This new strategy of selecting a
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“operational” system and undertaking “research” on how to improve its efficiency quickly
spread to other battlegrounds. The group directed by physicist P. M. S. Blackett, which
included physiologists, mathematicians, astrophysicists, and even a surveyor, was
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perhaps the most prominent of those participating in this project. This emphasis on a
multipurpose team in an operations research project group has continued to this day.
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Blackett’s most important contribution was persuading authorities of the necessity for a
scientific approach to managing complex operations, and he is often considered as the
“father” of operations research.
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A few years after its inception in England, O.R. made its way to the United States.
Its initial foray into the United States was via the US Navy’s Mine Warfare Operations
Research Group, which subsequently evolved into the Antisubmarine Warfare
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Operations Research Group, commanded by Phillip Morse, and later known simply as
the Operations Research Group. Morse, like Blackett in the United Kingdom, is usually
considered as the “father” of O.R. in the United States, and many of the renowned
scientists and mathematicians he led went on to become pioneers of O.R. in the United
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States when the war ended.
O.R. expanded fast in the years immediately after World War II’s conclusion, as
many scientists recognised that the ideas they had used to tackle military difficulties
could be applied to a wide range of problems in the civilian sector. Short-term issues
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like scheduling and inventory management were addressed, as were long-term issues
like strategy planning and resource allocation. The single most significant push for
this progress came from George Dantzig, who created the simplex method for Linear
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Programming (LP) in 1947. Despite the relatively recent introduction of interior point
methods as an alternative approach, the simplex algorithm (with several computing
enhancements) remains one of the most extensively utilised of all O.R. approaches to
this day. The fast development of digital computers over the following three decades
provided the second main stimulus for the rise of O.R. In 1950, the simplex technique
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was first implemented on a computer, and by 1960, such implementations could handle
problems with up to 1000 constraints. Today, powerful workstation implementations
can answer problems with hundreds of thousands of variables and constraints on a

regular basis. Furthermore, the huge amounts of data necessary for such issues can be
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efficiently stored and handled.
Following the invention and usage of the simplex approach, the development
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of alternative methods accelerated. Most of today’s O.R. approaches, including as
nonlinear, integer, and dynamic programming, computer simulation, PERT/CPM, queuing
theory, inventory models, game theory, and sequencing and scheduling algorithms,
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were developed during the following two decades. These approaches were created by
scientists from a variety of areas, including mathematics, engineering, and economics.
Many of these approaches’ theoretical foundations have been known for years, for
example, the EOQ formula used with many inventory models was created by Harris in
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1915, and many of the queuing equations were published by Erlang in 1917. However,
it was between 1950 and 1970 that they were officially united into what is now regarded
the conventional toolkit for an operations research analyst, and they were effectively
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applied to industrial situations. The section that follows explains how operations research
approaches issue solving and how all of these strategies fit into the O.R. framework.
1.1 Definitions of Operations Research, Features of
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OR and Its Approach to Problem Solving
Introduction
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OR (Operations Research) is a field that uses a collection of sophisticated
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analytical tools to assist people make better choices in difficult situations. It combines
mathematical, statistical, and probabilistic theories, conclusions, and theorems with its
own problem-solving ideas and methods. OR methods are used in a variety of domains,
including engineering, management, and public systems.
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“Operational research” is a word used by the British and Europeans, while

“operations research” is used by the Americans; nonetheless, both terms are often
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abbreviated to “OR,” which is the phrase we shall use.
The phrase “management science” is also used to describe this area (“MS”). The
names “OR/MS” or “ORMS” are occasionally used interchangeably in the United States.
“Industrial engineering” (“IE”) and “decision science” are two additional names that are
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occasionally used (“DS”). In recent years, there has been a push for the discipline to be
standardised under a single title, notably “OR.”
Operational Research is a rather recent field. The OR’s contents and bounds have
yet to be determined. As a result, providing a formal definition of the phrase Operations
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Research is challenging.
When mathematical and quantitative approaches are utilised to support a choice,

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the OR process begins. A manager’s primary responsibility is to make decisions. We

make choices in our everyday lives without even realising it. In basic circumstances,
judgments are made only on the basis of common sense, judgement, and skill, without
the use of any mathematical or other model. However, the choice we’re talking about
is complicated and carries a lot of weight. Planning a public transportation network in
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a city with its unique layout of industries, residential blocks, or determining the best
product mix when there are a big number of items with various profit contributions and
production requirements, to name a few examples.

The instruments used in operations research come from a variety of disciplines.

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Operations Research uses techniques from a variety of disciplines, including
mathematics, statistics, economics, psychology, and engineering, to provide a new set
of knowledge for decision-making. Today, O.R. has evolved into a professional subject
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concerned with the use of scientific techniques in decision-making, particularly in the
allocation of limited resources. Because systems made up of humans, machines, and
processes may lack entire knowledge, the major goal of O.R. is to establish a reasonable
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foundation for decision-making in the absence of comprehensive information.
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1.1.1 Definitions of Operations Research
Meaning and Definition of Operation Research:

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It is a process of analysis through which management obtains assistance in making

choices. Though the name of this approach, Operation Research (O.R.), is new, the
method itself is old. The application of scientific ideas and procedures to strategic
challenges is what Operation Research is all about.
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Operation research was developed in the United Kingdom during WWII and was
utilized for military planning. During World War II, a group of scientists comprised of
experts in mathematics, statistics, physics, and social sciences was tasked with
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researching different military activities. This crew was very successful, and they made
a significant contribution to the operation’s precise management of the whole operation
and its associated challenges.
The need for such studies for operations arose as military strategies and decisions
became more important and costly, so the best scientists were grouped together under
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the sponsorship of military organs to provide quantitative information using scientific

techniques and methods to aid in decision-making.

It was first used in the domains of manufacturing, commerce, agriculture, planning,

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and a variety of other economic disciplines after World War II.
The operation research can be defined as:
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Definitions:
1. It is the application of scientific methodologies, techniques, and tools to issues
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regarding a system’s operations to deliver the best possible answers to people in
charge of the system.
2. Operation Research is a decision-making technique that seeks for the best outcomes
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while keeping in mind the organization’s overall goals and limits.
3. O.R. is a scientific approach for providing executive departments with a quantitative
foundation for making choices about the activities they oversee.
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4. O.R. is a scientific method to management issue solving.
5. O.R. is a tool that assists executives in making choices by supplying them with the
quantitative data they need using a scientific approach of analysis.
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6. O.R. is the application of contemporary mathematical scientific approaches to
complicated problems in industry, business, government, and defense involving
enormous systems of workers, machines, materials, and money. The unique
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method is to create a scientific model of the system that includes measurements
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of characteristics like chance and risk to forecast and analyses the outcomes of
different choices, tactics, or controls.
7. It is the application of scientific methodologies to the study of a specific operation
by scientists and topic experts. Its goal is to establish a solid foundation for
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“decision-making” by providing a quantitative basis for forecasting the most effective

consequences of an operation under a set of variable situations.
Research methodologies and scientific procedures are used in Operation Research
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for the analysis and investigation of existing and future challenges. As a result,
Operation Research presents management with potential solutions to an issue.
Although it is evident that operation research does not make choices for management,
the technique does provide management with a thorough scientific and quantitative
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examination of the situation, allowing management to make more informed judgments.
According to Moarse and Kimbal (1946) “OR is a scientific method of providing

executive department with a quantitative basis for decision regarding the operations
under their control.
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Similarly, according to Dictionary of Military and Associated Terms US Department

of Defense 2005 “The analytical study of military problems undertaken to provide
responsible commanders and staff agencies with a scientific basis for decision on
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action to improve military operations is called OR”. It is also called operational research;
operations analysis.
According to Britannica Concise Encyclopedia, “OR is the application of scientific

methods to management and administration of military, government, commercial, and
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industrial systems. It is characterized by a systems orientation, or systems engineering,

in which interdisciplinary research teams adapt scientific methods to large-scale
problems that must be modeled, since laboratory testing is impossible.

In the same way, McGraw-Hill Science & Technology Encyclopedia defines OR

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as the application of scientific methods and techniques to decision-making problems.
A decision-making problem occurs where there are two or more alternative courses
of action, each of which leads to a different and sometimes unknown end result.
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Operations research is also used to maximize the utility of limited resources. The
objective is to select the best alternative, that is, the one leading to the best result.
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1.1.2 Features of Operation Research
Important features of Operation Research
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●● Operation Research both as an Art and a Science
Operation with a scientific bent the intrinsic attitude and scientific methodologies
that it utilizes to tackle its challenges are the reasons for research. However, the Art
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component is the only one that is utilized to apply the choice for the whole organization.
Rather of experimenting with numerous approaches, Operation Research believes

in uncovering appropriate answers for organizational challenges. OR recognizes the
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significance of the human aspect, which is regarded as the most important factor in the
implementation of any problem-solving strategy.
●● Administrative decision making

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The purpose of all businesses and industries is to earn money. To achieve such
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earnings, a company’s administrative department must make a sound choice that will
have a significant influence on the company’s profit margin.
Non-profit organisations, such as non-governmental organisations, educational

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institutions, hospitals, and others, make money by increasing outputs while lowering
inputs. This is accomplished by well-planned, efficient, and successful management.
Generation of many options and selection of the finest choice based on the scenario
is unquestionably a sound decision-making technique. Operation Research is used to
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make this proper decision selection.
●● Utilisation of Information Technology (IT)

Operation Research relies heavily on information technology to tackle difficult
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arithmetic issues. This is since Operation Research’s decision-making technique is

entirely reliant on computer operations.
●● System Approach
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It is a system approach, as the theoretical model of Operation Research

demonstrates. OR incorporates all of a company’s divisions and sub-systems. The firm
is affected by this technique.
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If just a small portion of a corporation benefits from Operation Research’s

optimization results, it is not regarded appropriate. Before using this Operation Research
approach, a company’s management should be aware of the effects and repercussions.
●● Co-relative Approach
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While conducting business, a corporation must deal with a variety of challenges.

Engineering, economics, human resource management, infrastructure linked to
markets, and other issues are among the issues.

The members of the Operation Research team should come from a variety of
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backgrounds, including management, engineering, science, and the company’s needed
disciplines. The following point should be considered by an organisations OR team if
it intends to tackle challenges in a variety of disciplines. A corporation can only make
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advantageous decisions for itself if it follows the proper process.
●● Quantitative technique
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Because it uses mathematical models to develop reasonable quantitative answers
to administrative issues, Operation Research is considered a quantitative method. The
administrative body uses Operation Research inputs by doing a quantitative study of
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the problem and then selecting the best remedy in the company’s best interests.
1.1.3 OR and Its Approach to Problem Solving
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The act of attaining the optimal outcome under any given scenario is known as
optimization. Many technical or management judgments may be required at different
stages in various practical challenges. All such selections have the same end goal: to
maximise the intended benefit while minimising the work necessary. In our daily lives,
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we make choices without even realising it. One of a manager’s or executive’s key
responsibilities is to make decisions. In basic circumstances, judgments are made
only on the basis of common sense, good judgement, and skill, and no mathematics
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is used. But the options we’re talking about are a little more complicated and come
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with a lot of weight. Finding the optimal product mix when there are a big number of
items with various profit contributions and production requirements, or arranging public
transportation in a town with its unique layout of industries, residences, blocks, and so
on, are examples of such decisions. While decisions may be made instinctively based
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on experience and common sense in such circumstances, they are more prudent
when backed up with mathematical logic. Trial and error may also be used to arrive
at a choice, although this method can be time-consuming and expensive. Preliminary
computations may save time and money in the long run. The goal of operations
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research is to do preliminary computations. Operations research scores the effects of a

choice mathematically in order to maximise the utilisation of time, effort, and resources
while minimising mistakes.
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The use of operations research methodology aids decision-making in such

difficult scenarios. The primary goal of operations research is to provide a scientific
foundation to decision-makers for solving problems involving the interaction of various
organisational components by assembling a team of scientists from various disciplines
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who collaborate to find the best solution for the organisation.
Applications of Operation Research

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O.R. is a decision-making and problem-solving approach. It’s a set of scientific and

programmable guidelines that gives managers a “quantitative foundation” for making
choices about the operation they’re in charge of.
Some areas of management where O.R techniques have been successfully utilized
are as follow:
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1. Allocation and Distribution in Projects:

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(i) Optimal resource allocation to projects, including persons, materials, machinery,
time, and money
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(ii) Identifying and deploying the appropriate manpower
(iii) Project planning, management, and control
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2. Production and Facilities Planning:
(i) Choosing the size and location of the factory
(ii) Calculation of the needed number of facilities
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(iii) Forecasting for different inventory goods, as well as calculating economic order
amounts and reorder levels
(iv) Proper machine allocation allows for the scheduling and sequencing of
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production runs
(v) Loading and unloading of transportation
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(vi) Choosing a warehouse site
(vii) Policy choices on maintenance
3. Programmes Decisions:
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(i) What to buy, when to buy it, and how to get the best deal
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(ii) Policies for bidding and replacement
4. Marketing:
(i) Allocation of advertising funds
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(ii) The time of the product launch

(iii) Advertising medium selection
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(iv) Product mix selection

(v) Size, colour, and packaging preferences of customers for diverse items.
5. Organization Behaviour:
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(i) Personnel selection, retirement age determination, and talent assessment

(ii) Job assignment and recruitment policies
(iii) Employee recruitment
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(iv) Training programme scheduling

6. Finance:
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(i) Cash flow analysis and capital needs

(ii) Credit policies, hazards, and so forth
(iii) Choosing an investment
(iv) The company’s profit strategy
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7. Research and Development:

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(i) Preparing for the launch of a new product
(ii) Project management of R&D
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(iii) The selection of research and development fields
(iv) Choosing projects and preparing budgets for them
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(v) Development project dependability and control as a result, it is possible to infer
that operation research may be employed broadly in management choices and
as a corrective measure
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1.2 Models and Modeling in or Methods for Solving OR Models
Introduction
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The core of operation research is modelling. A model is an idealised portrayal of a
real-world situation that has been abstracted. Modeling is a real-life setting that allows
us to investigate the various behaviours of an issue based on its description. A model
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might take the form of a drawing, a map, a curve, or an equation. The validity of the
model or the underlying assumptions on which the model is formed may influence the
dependability of the judgement taken from it.
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Modeling a real-life scenario allows us to investigate the various behaviours of the
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issue as they relate to the problem description. Experts have put forth a lot of effort to
simulate economic scenarios, military operations, the movements of planets and stars,
traffic congestion, and so on.
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A model is an idealised or abstract depiction of a real-world problem. The goal of a

model is to give a mechanism of analysing the system’s behaviour in order to improve
it. Models include a map of various activity chars, a project network, a representation
of a queuing system’s behaviour, a model to predict the future based on the past and
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present variables of a time series, and so on.
A iconic model is a scaled-down physical depiction of a genuine project. A toy car

is a miniature replica of a genuine vehicle. A globe is an iconic model of the planet, and
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a picture is an iconic model of the earth as well. They enhance or diminish the scale of
an actual system in general. In other words, they are representations of a physical item.
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1.2.1 Models and Modeling in OR

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Models of operations research
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The majority of operations research projects include the development of a
mathematical model. Operations research models are a set of logical and mathematical
connections that reflect many elements of the scenario under investigation. Models define
essential connections between variables and contain an objective function for evaluating
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alternative solutions as well as restrictions that limit solutions to achievable values.
A model is always an abstraction that is unavoidably less complex than the
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actual situation. Elements that are extraneous or unimportant to the issue should be
discarded, perhaps leaving enough information for the model’s solution to be useful in
solving the original problem.
Models must be tractable, that is, solvable, as well as valid, that is, reflective of the
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real scenario. These two objectives are often incompatible and not always achievable.
The most powerful solution techniques may often be used to the simplest, or most
abstract, model.
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A model is an idealised or abstract depiction of a real-world problem. The goal of a
model is to give a mechanism of analysing the system’s behaviour in order to improve
it. Models include a map of various activity chars, a project network, a representation
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of a queuing system’s behaviour, a model to predict the future based on the past and
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present variables of a time series, and so on.
A iconic model is a scaled-down physical depiction of a genuine project. A toy car

is a miniature replica of a genuine vehicle. A globe is an iconic model of the planet, and
a picture is an iconic model of the earth as well. They enhance or diminish the scale of
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an actual system in general. In other words, they are representations of a physical item.
Advantages of Model:
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1. A concrete model is an iconic model

2. The model is simple to put together
3. The model is easier to study than the system itself
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Disadvantages of Model:
1. This model isn’t meant to be manipulated any more.
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2. It cannot be utilised to investigate changes in the system’s functioning.

3. It is not feasible to alter the model in any way.
4. This paradigm does not allow for adaptation to new circumstances.
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A model is a tool for getting to a well-structured reality issue. A cricket match

commentator depicts the play as a model, allowing us to foresee the play’s future
sequence of events. It’s a descriptive model that may be used for future investigation. It
is not always feasible to analyse a situation just on the basis of its description. We must
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turn the issue into a tangible mathematical representation, such as a curve, graph, or
set of equations. Iconic, analogue, and symbolic models are the three types of models.

1.2.2 Methods for Solving OR Models

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Operating systems research models
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The numerous models of Operations Research are as follows:
1. Analytical models
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A quantitative analytical model is used to answer a particular query or make a
specific design choice. To address various characteristics of the system, such as
performance, dependability, or mass attributes, multiple analytical models are utilised.
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Analytical models must be stated precisely enough to be formally analysed, which
is usually done by a computer.
Analytical models are further divided into the following categories:
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Analytical Model (Static)
Dynamic Analytical Model
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●● A static model depicts a system’s attributes that are time-independent, or true
at any point in time. The attributes under consideration may have deterministic
values or probability distributions on them.
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A dynamic model is an analytical model that depicts the system’s time-varying
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state, such as acceleration, velocity, and location, as a function of time.
The choice between a dynamic and a static model is determined on the sort of
inquiry being addressed.
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2. Simulation models
By employing statistical representations of the activities involved, simulation
models attempt to reproduce the workings and logic of a genuine system.
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‘Entities’ (e.g. machines, materials, people, etc.) and ‘activities’ are two types
of entities in a simulation model (e.g. processing, transporting, etc.). It also includes
an explanation of the reasoning that governs each action. A processing activity, for
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example, may only begin when a particular amount of working material, a human to
operate the machine, and an empty conveyor to transport the result are all accessible.
Once an activity has begun, the time it will take to complete it is determined, which is
often done using a sample from a statistical distribution.
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The model is begun and continues to run throughout time, following the set of
logical principles. The data on delays, for example, is then removed.
Simulation models can clearly simulate a complicated industrial system. They may
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be used to represent the amount of shared resources required by the operation (for
example, forklift trucks or workers), line speeds, vessel or storage tank sizes, and so on.
3. Analog models
(c
Analog models reflect the physiological process using components that are similar
to those in the real process to some extent. Analog models can describe a system at a
lower level and with more detail than systems models, although not all analogue models

can do so. Analog models are better at representing secondary characteristics like
Notes
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energy consumption, which is generally the same between analogue parts and the real
components they represent.
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4. Symbolic models
Symbolic Models, also known as Mathematical Models, are those that utilise a
collection of symbols (letters, numbers, etc.) and functions to represent the decision
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factors and their interactions in order to explain the behaviour of the system. The
symbols are usually mathematical or logical in nature. Because of the vast quantity
of complexity connected with an organisation, they are by far the most often used in
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an O.R. research. A symbolic or mathematical model is made up of a collection of
equations that describe and specify the relationships and interactions between the
different parts of the decision issue under consideration. The issue is then solved
using well-developed mathematical approaches applied to the model. Symbolic models
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include the following characteristics:
●● It is made up of a collection of representations (or symbols) of anything.
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●● It uses a set of rules coded into the model to process and alter such representations.
●● The criteria apply to the representations based on their’shape’ or syntax rather
than what they represent (their semantics).
5. Iconic models
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Physical model is another name for iconic model. Iconic model is a physical
representation of anything in an idealised form or on a different scale, i.e. a representation
is an iconic model to the degree that its qualities are identical to those of the thing
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it represents. Iconic models of people or things include photographs, cyclographs,

blueprints, and paintings. The toy aeroplane is a well-known representation of a real
aircraft. A static event is usually represented with an iconic model.
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1.3 Phases of OR Approach to Problem Solving

Introduction
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The three steps of the scientific process in O.R. research are as follows:
1. The first step is to make a decision. This includes (i) determining the operation,
(ii) establishing the operation’s aims and values, (iii) determining the appropriate
measurements of effectiveness, and (iv) formulating challenges connected to the
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objectives.
2. The research stage. This phase includes I operations and data collection to gain
a better understanding of the problems, (ii) hypothesis and model formulation, (iii)
)A
observation and experimentation to test the hypothesis with additional data, (iv)
analysis of the available data and hypothesis verification using pre-established
effectiveness measures, and (v) predictions of various results from the hypothesis.
(vi) examination of other methodologies and generalisation of the different outcomes.
(c
3. The Execution Phase. It entails those who originally offered the difficulties for
consideration, as well as anybody in a position to make a choice, offering suggestions for
the decision-making process, so affecting the operation in which the problem originated.

Notes
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Methodology of operation Research/General approach to solve a problem in
operations research.
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Step 1: Define and identify the issue.
Obtaining “Right solutions from the wrong issue” is impossible. The goals,
alternative courses of action, limitations, and impact of the system under investigation
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must all be adequately defined when articulating the issue.
Step 2: Develop a mathematical model –

)A
The next step is to create a mathematical model of the issue using the essential
parts listed below:
Decision variables and parameters, as well as uncontrolled variables: A controllable

variable is one that the decision maker has direct influence over. These variables’
values must be established. Uncontrollable variables are those that are outside
(c
the decision maker’s direct control. Prices are rising as a result of a change in
government policy.

Constraints or restrictions– In order to assess the system’s physical limitations, the

Notes
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model must incorporate constraints.
A mathematical statement of profit or cost for a certain process is known as an
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objective function.
Two items, for example. P1 and P2 are two different types of people. There are two
machines. M1 M2 M3
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P1 units need 3 hours on M1 and 1 hour on M2, whereas P2 units require 2 hours
on M1 and 2 hours on M2.
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On M1 and M2, the number of hours available per week is 60 and 40, respectively.
P1 and P2 make a profit contribution of Rs. 60 and Rs. 50 per unit, respectively. to
make the most money possible Make a mathematical model of the situation.
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Profits per unit, cost/unit quantity of resources are all uncontrolled variables. x1 and
x2 = controllable variables whose values must be set.
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Constraints (ii) and (iii) in equation I = objective function
Step 3: Come up with a solution –

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The next stage is to find a solution, which entails determining which values of the
decision variables best meet the stated goal (maximization of profit and minimization of cost).
Step 4: Put the model and solution to the test –

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It entails putting the model to the test. A model is valid if it can accurately anticipate
the performance of a system. A competent operation research analyst strives to always
keep his model up to date.
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Step 5: Control and implementation
The next stage is to put the solution into action. The answer should be explained
in terms of the process employed in the real system. Observe the system’s behaviour
after implementing the solution. Proper feedback establishes control over the solution.
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Methodology of Operations Research

The methodical technique established for the O.R. examination of issues
)A
containing various goals, policies, and options that clash. In the end, OR is a scientific
approach for studying the operations of big complex organisations or activities with the
goal of determining the overall ramifications of many alternative courses of action and
so giving a better foundation for management choices.
Step 1: formulation of the problem

(c
The OR team should explicitly outline the management challenge and then
translate it into a research topic during this phase. The OR team conducts a detailed
study of organisational structure and function, communication and control systems,

Notes
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organisational goals and policies, and so on in order to formulate the management
issue in the first place.
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Problem formulation has a different connotation in the O.R. method than it does in
everyday language. The following are the primary components of a problem:
●● A decision-maker, whether a group or a person, who is confronted with an issue.
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●● The setting in which the issue is intended to exist. It’s possible that the
problem’s origins might be traced to a different location. As a result, it’s a good
idea to refer to the whole organisation as the second component.
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●● Mission Statements
●● Alternative paths of action that have an impact on the goals. The results are
unknown in advance, leaving decision-makers perplexed as to which course
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of action to take.
●● Strict Requirements
Step 2: analysis and problem definition
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After assessing the environmental issue, the researcher should further analyse
the problem and characterise it in more precise words. All aspects that impact the
difficulties, both directly and indirectly, should be considered. The in-depth examination
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of the issue aids in its appropriate comprehension and their contribution to the
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problem’s best solution.
Assume a manager discovers that a decrease in sales volume is producing a decrease

in the current year’s earnings. The issue has been assigned to the operations researcher.
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Now, the operations researcher examines the pricing and promotions of the
company’s items. He realises that the fundamental issue is promotion. He has to look at
the many factors that are causing the sales decline. It’s possible that the culprit is:
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The amount of money that was spent.
The media that was utilised.
The sale’s schedule.

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Alternatively, any combination of the above.
Step 3: collecting the data that the model requires
‘Garbage in, garbage out,’ goes the old adage. It implies that if the data is incorrect,
m
the model created from that data will be incorrect as well. As a result, the data should
be obtained with extreme caution. The information might come from a primary or
secondary source. This implies that the researchers need undertake new study or
)A
consult historical documents in order to get the data.
Step 4: produce a mathematical model
The next step in the O.R process is to attempt to explain the important
characteristics of the system under investigation using a mathematical model. A
(c
mathematical model may have the following general form:
f = E (xi, yi)

Where f is a set of mathematical connections between the variables and the

Notes
e
measure of effectiveness of the desired goals (E). Controllable (xi) as well as
uncontrollable (yi).
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Step 5: from the model to solutions
Following the formulation of the mathematical model, the value of choice variables
that maximise the specified objective function must be determined. Much of this
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material is devoted to the different mathematical strategies for arriving at such answers.
In addition to the model’s solution, sensitivity analysis, or determining how the

system responds to changes in system parameters and specifications, is often required.
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This is done because the model’s structural assumptions may not be true and the input
data (parameters) may not be accurate or steady. As a result, sensitivity analysis is an
important aspect of this stage of the technique that should not be disregarded.
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Step 6: evaluation of the model
Because a model is merely a simplified and incomplete depiction of reality, the

findings must be compared to real-world experience to determine the model’s reliability.
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When starting to create the model, some simplifying assumptions are made. These
assumptions may be adjusted one at a time to evaluate how the model reacts to
the changes.
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Similarly, for the sake of abstraction and simplicity, the inclusion of certain incorrect
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variables in the model and the removal of some acceptable variables from the model
may need assessment so that their influence on the model in relation to reality may be
assessed properly. Model distortion, whether deliberate or unintentional, must be carefully
analysed using past experience judgement, real test data, and similar technologies.
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Step 7: setting up controls over the solution
Complex models of particular issues generate decision ties, which may be utilised
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as processes to handle repeatable circumstances without having to develop a model

each time. This necessitates the introduction of controls into the model in order for it to
be flexible to a variety of problems. In the dynamic business environment, parameter
values change often; some parameters become obsolete, and new parameters
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develop, which, if not addressed, would render the model solution ineffective for future
comparable situations. When substantial changes in the parameters and relationships
are detected, a conscious control mechanism must be devised to indicate the action to
be performed or the adjustments to be made in the solution.
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Step 8: putting the solution into place.
This is unquestionably the most crucial stage of the research, since advantages
only accrue after a suggestion has been executed. After deciding on an operationally
)A
viable solution, the stage is prepared to put that solution into action. This is seldom
straightforward, since solutions that seem possible on paper may clash significantly with
the views and capabilities of the system’s participants. Many perfectly reasonable (in
theory) OR proposals are never implemented because they are impracticable in reality.
(c
Finally, no system is fully static, and it is vital to constantly monitor the environment
in which it functions to ensure that changing circumstances do not make a solution
ineffective. It’s critical to make sure that any solution you put in place is examined on a
regular basis and, if required, updated and amended in light of changing circumstances.
Notes
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Changes in the economy, shifting demand, and model additions required by managers
and decision-makers are just a few examples of changes that may necessitate
modifying the study.
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1.4 Application Areas of Operation Research
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Introduction
Operations Research (O.R.) has become an important aspect of the Industrial
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Engineering (I.E.) profession, despite being a separate field. This is hardly surprising
given that they share many of the same goals, strategies, and application areas. O.R.
as a formal topic is around fifty years old, with roots dating back to World War II’s second
half. Most of the today’s O.R. procedures were created in the first twenty years after
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its commencement. The rate of development of fundamentally new O.R. approaches
decreased during the following thirty years or more. However, both (1) the range of
issue areas to which O.R. has been applied and (2) the magnitudes of problems that
may be solved utilising O.R. approaches have grown rapidly. Operations research is
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now a mature, well-developed subject with a sophisticated set of methodologies that are
frequently used to address issues in a broad variety of applications.
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This chapter will provide you an overview of O.R. from the standpoint of an
Industrial Engineer. First, a short history of its beginnings is presented. The core
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theory of O.R. and the so-called “O.R. method” are then discussed in length. The
chapter ends with many instances of effective applications to common challenges that
an Industrial Engineer could encounter. In general, an O.R. project consists of three
steps: (1) creating a model, (2) solving it, and (3) putting the findings into practise. The
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first and third stages are the focus of this chapter. The second phase usually involves
the use of certain procedures or techniques, which may be highly complex and need
substantial mathematical research. This manual covers several essential approaches
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in detail elsewhere. If the reader wants to learn more about these themes, they should
consult one of the numerous outstanding O.R. works available today, such as Hillier
and Lieberman (1995), Taha (1997), or Winston (1998), which are recommended under
“Further Reading” at the conclusion of this chapter (1994).
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(c

1.4.1 Application Areas of OR

Notes
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Applications of Operation Research
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O.R. is a decision-making and problem-solving approach. It’s a set of scientific and
programmable guidelines that gives managers a “quantitative foundation” for making
choices about the operation they’re in charge of.
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Some areas of management where O.R techniques have been successfully utilized
are as follow:
1. Allocation and Distribution in Projects:
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(i) Optimal resource allocation to projects, including persons, materials, machinery,
time, and money.
(ii) Identifying and deploying the appropriate manpower.
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(iii) Project planning, management, and control.
2. Production and Facilities Planning:
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(i) Choosing the size and location of the factory
(ii) Calculation of the needed number of facilities
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(iii) Forecasting for different inventory goods, as well as calculating economic order
amounts and reorder levels
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(iv) Proper machine allocation allows for the scheduling and sequencing of
production runs
(v) Transportation loading and unloading
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(v) Transportation loading and unloading

(vii) Policy choices on maintenance
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3. Programmes Decisions:
(i) What to buy, when to buy it, and how to get the best deal
(ii) Policies for bidding and replacement
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4. Marketing:
(i) Allocation of advertising funds
(ii) The time of the product launch
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(iii) Advertising medium selection

(iv) Product mix selection
)A
(v) The size, colour, and packaging of different items that customers desire
5. Organization Behaviour:
(i) Personnel selection, retirement age determination, and talent assessment
(ii) Job assignment and recruitment policies
(c
(iii) Employee recruitment

(iv) Training programme scheduling

6. Finance:
Notes
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(i) Cash flow analysis and capital needs
(ii) Credit policies, hazards, and so forth
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(iii) Choosing an investment
(iv) The company’s profit strategy
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7. Research and Development:
(i) Preparing for the launch of a new product
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(ii) Project management of R&D
(iii) The selection of research and development fields
(iv) Choosing projects and preparing budgets for them
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(v) Development project dependability and control as a result, it is possible to infer
that operation research may be employed broadly in management choices and
as a corrective measure
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1.4.2 Uses, Scope and Operation research in Managerial Decision Making
Scope and Applications of Operations Research

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The purpose of operations research is to turn “muddled” business issues into
clearly defined mathematical entities, as well as to specify anticipated behaviour and
goals (well rooted in computer science and analytics).
It aims to empower decision-making in areas where the optimal use of limited

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resources — whether cash, human effort, time, or other resources — is a top priority.
Its scope is rather wide, since it is based on a scientific process of inquiry that
lends itself to a variety of issues that may be solved using mathematical models. Here
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are a few examples of locations where OR may be observed in action:
●● Manufacturing / Production Management

●● Finance Budgeting and Investing
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●● Purchasing, Procurement, Logistics, and Supply Chain Management

●● Management of marketing and revenue
●● Telecommunications Systems
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●● Health-Care Administration
●● Agriculture/Energy/Environment
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●● Military Protection
●● National Budgets and Plans
●● Units of the Public Sector / Government Development
Importance of Operations Research in Decision-Making

(c
Every day, business leaders are confronted with a never-ending list of complicated
concerns. They must make financial judgments, as well as decisions on where to

establish a facility, how much of a product to create, how many employees to recruit, and
Notes
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so on. The variables that make up business difficulties are often complex and difficult to
understand. Operations research is a method of addressing these vexing issues.
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Advantages of Operations Research
These mathematical techniques used in operations research help managers do
their jobs more effectively
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●● Keeping Things Under Control
Managers employ operations research approaches to keep a tighter grip on their
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subordinates. This is achievable because operations research offers a foundation
for establishing performance criteria and determining how to quantify productivity.
Managers may discover problem areas and take remedial action by reporting deviations
from norms.
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●● Making Better Decisions
People that employ operations research mathematical models can assess a larger
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number of options and restrictions than they could if they simply used an intuitive
method. It is simpler to assess several choices using operations research, resulting in
higher confidence in the best option.
●● r
Departmental Coordination should be improved.
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The goals of many departments are combined in an operations research study.
Operations research, for example, aligns the marketing department’s goals with the
manufacturing department’s timetables.
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●● Increased Efficiency in the Workplace

Operations research mathematical formulae may boost productivity by providing
a bigger number of optimum inventory mix, plant machine usage, factory size, labour
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planning, and technology implementation options.
1.4.3 Decision Making under Uncertainty

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Decision Making-Decision Making Under Uncertainty

“A decision is the is a conclusion of a process by which one choices between two
or more available courses of action for the purpose of attaining a goal”
●● A decision is a deliberate act in which a management comes to a judgement on

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what should be done in a specific scenario. And decision-making is a procedure

for reaching a conclusion. The process through which a person or organisation
choose a stance or course of action from a variety of options.
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●● In making a choice, three characteristics of human behaviour are involved.

●● Cognition refers to mental activities that are linked to knowledge.
●● Conation is the mental activity represented by words like willing, desire, and aversion.
(c
●● Affection is the mental element of emotion, feeling, mood, and temperament.

●● There are a variety of circumstances or environments in which choices are made.

●● Certainty
Notes
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●● Uncertainty\Risk
●● Uncertainty in conflict or competitive decision-making- When a manager makes
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a choice for which he has no knowledge, either about the result or the relative
probability of any single outcome, he is said to be functioning under uncertain
circumstances. Because the manager lacks any facts on which to base an
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analysis, the most he can do is acknowledge that he has no chance of foreseeing
occurrences. A variety of factors have been presented as suitable decision-making
basis in these circumstances. The following are the details.
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●● The maximal criteria aims to maximise the largest potential payout (optimistic).
●● The maximal criteria aims to maximise the smallest feasible payout (pessimistic).
●● Minimizing the decision maker’s greatest probable regret is the minimax criteria (regret).
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●● The inadequate Criterion assumes equally probable possibilities for the
occurrence of any potential condition of nature (insufficient reasoning).
Maximax criteria - when the most optimistic decision maker believes positively
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about the occurrence of events impacting the choice, he uses this decision criterion.
If this concept is followed, the management will choose the option that will result in the
best payoff.
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Maximin criteria—the most pessimistic decision maker uses this criterion. The
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management feels that the worst-case scenario may occur. Because of this pessimism,
the option that maximises the least favourable payout is chosen.
The minimising of regret is achieved by using the minimization criteria. The

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payment for each possibility in the state of nature of compitative action is removed from
the most advantageous payout that is feasible with the occurrence of the specific event.
When a management picks an option and a natural event occurs that does not result in
the most favourable reward, regret occurs.
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The insufficient reason criterion assumes that without any prior experience, it is
impossible or unnecessary to assign any probability to the current condition of affairs.
Probability may be assigned in this scenario as well since there is no criteria for doing so.
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Insufficient reason criterion or la place criterion are terms used to describe the scenario.
Decision making under Uncertainty example problems

Decision-making under uncertainty is an issue in which a decision-maker is aware
m
of several conceivable states of nature but lacks adequate knowledge to assign any
probability of occurrence to them. When there are numerous unknowns and no way of
predicting what could happen in the future to change the result of a choice, it is called a
decision under uncertainty.
)A
When we can’t foresee with 100% certainty what the effects of our actions will
be, we feel uneasy about a scenario. When we can’t offer a single response with total
conviction to a given question, we feel uncertainty.
(c
The reaction of competitors, new competitors, technological changes, changes

in customer demand, economic shifts, government legislation, and a host of other
factors beyond your control could all influence the launch of a new product, a major

change in marketing strategy, or the opening of your first branch. These are the kinds of
Notes
e
judgments that top executives of major organisations must make when committing vast
sums of money.
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The small company manager is confronted with similar circumstances that might
lead to actions that end in a catastrophe from which he or she may never recover.
When there are several conceivable outcomes from taking any course of action,
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a situation of ambiguity occurs. In terms of the payoff matrix, if the decision-maker
chooses A1, the payout might be X11, X12, X13, and so on, depending on which state
of nature S1, S2, S3, and so on will occur.
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Methods of Decision Making under Uncertainty
The approaches for making decisions in the face of uncertainty are. In the face
of ambiguity, several factors have been presented for determining the best course of
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action. Each of these criteria assumes about the decision-mindset. maker’s
The Maximin Criterion, often known as the pessimism criterion, is utilised when
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a decision-maker is gloomy about the future. The term maximin refers to maximising
the least payout. The pessimistic decision-maker seeks for the lowest potential return
for each option of action. The highest of these minimal payoffs is determined, and the
appropriate course of action is chosen. The following example demonstrates this:
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Consider the following scenario: Consider a scenario in which a decision-maker
has three potential options A1, A2, and A3, each of which may be influenced by the
occurrence of any of the four probable occurrences S1, S2, S3, and S4. The following
table shows the monetary payoffs for each combination of Ai and Sj:
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Solution: Since 17 is maximum out of the minimum payoffs, the optimal action is A2.
When the decision-maker feels hopeful about the future, the Maximax Criteria,
also known as the criterion of optimism, is applied. The term “maximum payout” refers
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to maximising the greatest reward. For each potential path of action, the optimistic
decision-maker locates the largest payout. The highest of these payoffs is determined,
and the appropriate course of action is chosen. Based on this criteria, the best course
of action in the above case is A3.
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Regret Criteria: This criterion is concerned with the regret that a decision-maker
may feel as a result of taking a given course of action. Regret is defined as the
difference between the best payout we might have gotten if we had known which
condition of nature would occur and the payoff we actually got. This difference is also
(c
known as opportunity loss or the opportunity cost, and it reflects the amount of the loss
sustained by not choosing the best option.

The payoffs corresponding to the actions A1, A2,...... An under the state of nature
Notes
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Sj are X1i, X2j,...... Xnj, respectively, according to the payoff matrix (provided in 12.6).
Assume that X2j is the best of them. The regret in choosing Ai, which is indicated by Rij,
is therefore provided by X2j - Xij, where I = 1 to m. We remark that there is no remorse
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in choosing A2. In a similar manner, the regrets for various activities in various stages of
nature may be estimated.
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The regret criteria is based on the minimax principle, which states that the
decision-maker should attempt to reduce the greatest regret. As a result, the decision-
maker picks the action with the least amount of regret for each of the activities, and the
action with the least amount of regret is viewed as optimum. As an example, the regret
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matrix may be stated as follows:
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The regret related to the course of action A3 is the smallest, according to the
maximum regret column. As a result, A3 is the best option.
The maximax and maximin criteria, as explained above, assume that the decision-
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maker is either optimistic or pessimistic. The Hurwicz Criterion presupposes that the
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decision-maker is either optimistic or pessimistic. However, a more practical approach
would be to consider the degree or index of optimism or pessimism of the decision-
maker throughout the decision-making process. If the degree of optimism is denoted by
a, a constant between 0 and 1, then the degree of pessimism is denoted by 1 - a. Then,
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using a and 1 - an as weights, a weighted average of an action’s maximum and lowest

payoffs is calculated. The action with the highest average is considered the best.
We can see that a number closer to unity means the decision-maker is hopeful,
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while a value closer to zero means he is pessimistic. The decision maker is neutralist if
a = 0.5.
This criteria is applied to Example 17’s payout matrix. Assume that the optimism
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index is a = 0.7
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It is optimum since the average for A3 is the highest.

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The Laplace Criterion argues that, in the lack of any information about the
probability of distinct states of nature occurring, one option is to assume that they
are all equally likely to occur. If there are n natural states, each may be given a
chance of occurrence of 1/n. We calculate the anticipated reward for each course
of action using these probabilities, and the action with the highest expected value is
(c
considered optimum.
Example 2

Decision Making under Uncertainty

Notes
e
A newspaper boy is considering offering a one-time special edition of a sports
magazine to his usual newspaper clients. He estimates that he can sell 9 to 12 copies
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based on his understanding of his consumer.
The magazines may be bought for $8 apiece and sold for $12 each. Non-sold
magazines may be returned to the publisher for a 50 percent reimbursement.
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If he sells a magazine, he gets four rupees as a profit. If he is unable to sell a
magazine he can return it to the publisher but he loss 50% purchasing price. It means
he is losing four dollars.
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He thinks that the demand can be either 9 or 10 or 11 or 12 copies. So, in other
terms basically, we have four states of nature that are
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N1is equal to 9
N2 equal to 10
N3 equal to 11
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N4 equal to 12
To meet this demand, which ranges from 9 to 12, the newspaper guy has four
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alternatives or tactics to choose from: he may purchase 9 magazines, 10 magazines, 11
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magazines, or 12 magazines.
Strategies are shown as
S1=9
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S2=10
S3=11
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S4=12
Pay off metric is given below regarding the above information.
Stratergy Events (Demand) Minimum Maximun

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(Stock) N1 = 9 N2 = 10 N3 = 11 N4 = 12 strategy (m) strategy (M)

S1 = 9 36 36 36 36 36 36
S2 = 10 32 40 40 32 32 40
S3 = 11 28 36 44 28 28 44
m
S4 = 12 24 32 48 24 24 48
According to the payoff metrics, the above criteria can be calculated as follows.
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Maximin criteria
The maximin criteria is also known as the pessimism criterion. This indicates
that the worst-case scenarios for each action are considered. Considering the
aforementioned measures, the decision-maker should pick the best of the worst by
(c
choosing the minimal reward.

According to the chart above, 36 is the maximum value, thus go with approach
Notes
e
S1. This indicates he is selling nine newspapers. The smallest reward is maximised by
doing this action. This choice is ideal for businesses whose very existence is at threat
due to losses.
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Case Study
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Case Study: An Analysis of Zara’s Current Operating Model
ZARA, a Spanish clothes and accessories company, was initially the brainchild
of the Inditex Group, which is currently controlled by Amancio Ortega. ZARA was
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established in 1975. Inditex is the largest fashion retailer in the world, and ZARA serves
as the company’s international flagship chain shop.
Inditex’s headquarters are located in A Corua, Galicia, Spain. From its humble
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beginnings as a single store in Spain to its most recent expansion into Australia,
ZARA now operates over 1,700 locations in 78 countries, supplying unique apparel to
consumers all over the world. By alone, ZARA was responsible for 64.6% of the total
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revenue generated by the Inditex company in 2010. As time has progressed, it has
evolved into one of the most prominent industry leaders among the many fashion
companies. Daniel Piette, the fashion director for Louis Vuitton, referred to ZARA as
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“probably the most inventive and damaging shop in the world,” while CNN referred
to the company as “Spanish’s success story.” Both of these accolades were given by
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ZARA.
Zara’s Operational Model

The most noteworthy part of Zara’s business strategy is the way in which it is moving
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away from “mass uniformity” and toward “customization” on a global scale. The company’s
founder emphasised Zara’s distinctive approach to fashion, which, much like food, should
be enjoyed as soon as possible rather than being stored away and going bad. As a result,
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the manufacture of brand new, fresh clothing is a direct response to the choice of the
consumer.
Zara’s business model makes it possible for the company’s operations to be more
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successful while also fulfilling the objective of satisfying the company’s customers. The
operating model used by Zara includes a wide variety of components, such as Company
structure, Vertical Integration, Just in Time, and many more, all of which, in the end,
contribute to the company’s Total Quality Management (TQM).
m
Structure of the Company

Which includes a Chairman, who is then followed by the other directors in the
hierarchy below him. The cell leaders for the cells below the directors or managers will
)A
be the directors or managers themselves. After all of the cells have reported to their
respective cell leaders, the cell leaders will then report to the head.
The organisation structure of Inditex is known as “Flat,” and its Chairman, Amancio
Ortega, serves as the head of all cell leaders. In addition, several directors serve in the
(c
capacity of cell leaders inside the company. The position of cell head for tax advisory,
financial and management control, etc. will be filled by the Deputy Chairman and CEO.

This makes it much simpler to monitor the activities that are taking on within the firm.
Notes
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Because the firm is organised in this manner, Inditex is in a position to effectively
monitor its procedures as well as its overall quality.
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Vertical Integration
Vertical integration refers to the process of uniting two companies that are located
at separate stages of the production process. This brings the company closer to the
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needs of the customers. It has the ability to manage access to input as well as the
pricing, quality, and delivery times of inputs.
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Vertical integration of a corporation is typically quite challenging due to the fact
that this process is both costly and difficult to unwind once it has begun. It is common
knowledge that several businesses collaborate with various distributors in order to
guarantee a market for their products.
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In the 1980s, Zara was compelled to take full control of production, distribution,
and sales due to the absence of other avenues to the Spanish consumer market. The
key to Zara’s success is the company’s vertically integrated supply chain. This precisely
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synchronised system provides exceptional speed while maintaining a lithe and elegant
look. This is the factor that contributed to Zara’s approach being successful.
The strategy of Zara is to provide clients with pricing that is in the middle of the
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market, fashion that is unique, and a choice of products that is always evolving. Because
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of this, Zara has experienced less of the “bullwhip effect.” The term “bullwhip effect”
refers to the tendency for fluctuations in final demand to become magnified as they are
communicated back up the supply chain.
Zara is always able to maintain a tight check on the quality of the product and the
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delivery of the goods to its retail stores since the firm is vertically integrated. Zara has
devised a plan according to which they would produce forty percent of the fabric in-house,
while purchasing sixty percent of the fabric from external suppliers. After that, Zara will
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make the designed fabric in-house before sending it to an outside supplier to be sewn.
After that, it will be sent back to Zara, where it will be inspected for quality before being
labelled. After that, the item is transported to Zara’s central storage, from whence it is sent
out to the various retail locations.
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The System of Push and Pull

When new designs are introduced into the market based on the current fashion
market trend, this process is known as a “push” system. On the other hand, a “pull”
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system is used when design changes are made based on customer feedback, but
these changes are implemented at a breakneck speed and place an emphasis on
the customer’s overall satisfaction. In the push method, the new design is typically
)A
conceived of by the designer team of the manufacturer.
Subsequently, the new design will be produced at bulk quantities, after which
it will be marketed and sold in retail establishments. Because of this, there will be a
greater demand in the market, and as a result, more people will go to the store to buy
(c
the merchandise. They attend fashion shows for ready-made clothing, where they get
an idea of the designs being launched in the market, and accordingly they launch their

design in the market. Zara’s designer team generally launches their seasonal collection
Notes
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late in the market, which enables them to get information about the designs being
launched by manufacturers and their demand accordingly. Additionally, they launch
their seasonal collection late in the market so that they can get information about the
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designs being launched by manufacturers. When Madonna visited Spain for a stage
presentation, Zara produced a new collection of design that was a reproduction of the
design used by Madonna in the past, which dramatically raised the demand for the
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product. Other times, Zara also introduces new collections in anticipation of the need for
the product.
The pull system typically functions based on the demand placed by consumers.
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This demand is typically sent to the design team, which will then produce the design
and send it back to the market to meet the demand placed by customers. There is yet
another strategy that manufacturers may use, which consists of advertising the product
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on a widespread scale. This strategy will result in a rise in the demand for the goods,
which will lead to an increase in sales.
Just in Time
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Japan is the birthplace of the just-in-time concept. This idea was initially developed
by Japanese shipbuilders, who reduced their steel inventory from one month’s worth to
just three days’ worth. Taiichi Ohno, who was the vice president of Toyota at the time, was
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the first person to write about JIT. However, the writing was originally in Japanese, making
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it challenging to comprehend; hence, it has been translated into English.
The Just-In-Time (JIT) mindset is what results from the reality that excessive
inventory holding is inefficient in the present production context. In addition, it is stated
that JIT promotes the adaptation of techniques to create the order of materials and
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intermediate products only when they are necessary. The transition from traditional
methods to JIT does not take place all at once, but rather takes place in stages over
the course of time. In the present environment of production, the elimination of waste is
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an essential step. Small batch manufacturing is made easier by JIT, which also makes
it easier to maintain a commitment to improving both the process and the product
continuously.
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Delivering products that are both of high quality and cheap cost in order to seize
the majority of the available market share is a primary worry for many businesses in the
present market environment. The majority of businesses have found that implementing
JIT has been helpful in addressing this issue. Because JIT eliminates the need for firms
to pay for the space to store their inventory and the labour required to maintain that
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inventory, it helps businesses save money. JIT is typically utilised in ‘Pull’ management,
which helps to maintain supply at the appropriate time even when there is strong demand.
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The method of design at Zara places a greater emphasis on the customers who
buy their products. This information is often gathered by the shop manager or other
members of the store staff, and it is then kept at the collection counter of each store. In
the evening, the collection details and the information that has been saved are sent to
the distribution centre.
(c
This information is communicated on a regular basis to the professionals that

design for Zara. Using this knowledge, the designer is able to determine what the

customer’s wants are and what their primary issues are, which enables them to
Notes
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carefully design the product and lessen the customer’s problems. Zara’s ability to
release a new design in the market in just six weeks, from the design stage all the way
to the shelves, makes it more efficient than the standard six-month cycle used by any
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other firm. The short time cycle allows for a reduction in the amount of working capital
required and also promotes the continual production of new goods.
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On 2008, it was noticed that “From design to the shelves, it takes 15 days for
Zara to deliver the product in the market.” [Citation needed] Also, Zara buys almost
half of their fabric in the colour ‘Grey,’ which provides them with the greatest amount
of versatility. Zara’s in-house production facilities can be found either within the
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headquarters building or in the surrounding area. Because of this, the designing and
approving of the product may take place relatively quickly, which eventually leads to
speedier manufacturing.
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These items are subsequently sent to Zara’s central distribution centre, which
is responsible for the further delivery of the product to the stores twice every week.
This makes it easier for Zara to manage its inventory and focus on the needs of its
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consumers.
Kaizen
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It indicates constant progress. The Japanese term kaizen refers to a whole way
of conducting business and is of origin in Japan. Every single person is required to
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participate in the same way in the kaizen process since it is of such significance to
the firm as a whole. The client will always have certain demands, requirements, and
expectations from the provider, and the output from the supplier will always have certain
qualities that are essential to the customer’s expectations; these qualities are referred
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to as “quality characteristics.”
There is never a perfect alignment between the needs of consumers and the
qualities of quality. The implementation of Kaizen helps to narrow that gap, which in turn
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brings the company closer to satisfying the expectations of its consumers. Customer
focus, Just in time, Kanban, flexible workplace practises, Empowerment, Quality
assurance, Leadership, Future thinking, High quality, Low cost, Reduction in wastage,
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Punctuality are key components of the Kaizen methodology.
The concept of Kaizen can be found throughout Zara as an organisational

philosophy. As we have saw, Zara possesses effective In addition to just-in-time
manufacturing, they place a greater emphasis on the needs of their clients and tailor the
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majority of their product designs to meet those needs. Zara has significantly cut down on
the amount of waste produced by the organisation because to the effective JIT approach.
The vast majority of Zara’s offerings have more affordable prices without sacrificing
quality. At Zara, we consistently adopt measures that promote workplace flexibility.
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Questions:
1. Analyze the business operation model of ZARA.
2. Write short notes on Just in time and Kaizen.
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3. Comment on the success of ZARA and also give suggestions for its lifetime success.

Summary:
Notes
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●● Operations research (OR) is a problem-solving and decision-making analytical
approach that is beneficial in business management.
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●● The phrase “management science” is also used to describe this area (“MS”).
The names “OR/MS” or “ORMS” are occasionally used interchangeably in the
United States.
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●● Operational Research is a rather recent field. The OR’s contents and bounds
have yet to be determined. As a result, providing a formal definition of the phrase
Operations Research is challenging.
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●● It is a process of analysis through which management obtains assistance in
making choices. Though the name of this approach, Operation Research (O.R. ),
is new, the method itself is old.
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●● It is the application of scientific methodologies, techniques, and tools to issues
regarding a system’s operations to deliver the best possible answers to people in
charge of the system.
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●● O.R. is the application of contemporary mathematical scientific approaches to
complicated problems in industry, business, government, and defense involving
enormous systems of workers, machines, materials, and money. The unique
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method is to create a scientific model of the system that includes measurements
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of characteristics like chance and risk to forecast and analyses the outcomes of
different choices, tactics, or controls.
●● Research methodologies and scientific procedures are used in Operation Research
for the analysis and investigation of existing and future challenges. As a result,
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Operation Research presents management with potential solutions to an issue.

●● Operation with a scientific bent the intrinsic attitude and scientific methodologies
that it utilizes to tackle its challenges are the reasons for research. However, the Art
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component is the only one that is utilized to apply the choice for the whole organization
●● The purpose of all businesses and industries is to earn money. To achieve such
earnings, a company’s administrative department must make a sound choice that
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will have a significant influence on the company’s profit margin

●● The act of attaining the optimal outcome under any given scenario is known as
optimization. Many technical or management judgments may be required at
different stages in various practical challenges. All such selections have the same
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end goal: to maximise the intended benefit while minimising the work necessary. In
our daily lives, we make choices without even realising it.
●● The core of operation research is modelling. A model is an idealised portrayal of
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a real-world situation that has been abstracted. Modeling is a real-life setting that
allows us to investigate the various behaviours of an issue based on its description.
●● A iconic model is a scaled-down physical depiction of a genuine project. A toy car
is a miniature replica of a genuine vehicle. A globe is an iconic model of the planet,
and a picture is an iconic model of the earth as well. They enhance or diminish the
(c
scale of an actual system in general. In other words, they are representations of a

physical item.

●● The majority of operations research projects include the development of a

Notes
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mathematical model. Operations research models are a set of logical and
mathematical connections that reflect many elements of the scenario under
investigation. Models define essential connections between variables and contain
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an objective function for evaluating alternative solutions as well as restrictions that
limit solutions to achievable values.
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●● A model is a tool for getting to a well-structured reality issue. A cricket match
commentator depicts the play as a model, allowing us to foresee the play’s
future sequence of events. It’s a descriptive model that may be used for future
investigation. It is not always feasible to analyse a situation just on the basis of its
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description. We must turn the issue into a tangible mathematical representation,
such as a curve, graph, or set of equations. Iconic, analogue, and symbolic
models are the three types of models.
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●● A quantitative analytical model is used to answer a particular query or make a specific
design choice. To address various characteristics of the system, such as performance,
dependability, or mass attributes, multiple analytical models are utilised.
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●● Analog models reflect the physiological process using components that are
similar to those in the real process to some extent. Analog models can describe a
system at a lower level and with more detail than systems models, although not all
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analogue models can do so. Analog models are better at representing secondary
characteristics like energy consumption, which is generally the same between
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analogue parts and the real components they represent.
●● Symbolic Models, also known as Mathematical Models, are those that utilise
a collection of symbols (letters, numbers, etc.) and functions to represent the
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decision factors and their interactions in order to explain the behaviour of the
system. The symbols are usually mathematical or logical in nature.
Glossary
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●● Operation Research: Operations research, often shortened to the initialism

OR, is a discipline that deals with the development and application of advanced
analytical methods to improve decision-making.
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●● Problem Solving: Problem solving is the act of defining a problem; determining

the cause of the problem; identifying, prioritizing, and selecting alternatives for a
solution; and implementing a solution.
●● Decision making: Decision making is the process of making choices by
m
identifying a decision, gathering information, and assessing alternative resolutions.

●● Quantitative technique: Quantitative methods emphasize objective
measurements and the statistical, mathematical, or numerical analysis of data
)A
collected through polls, questionnaires, and surveys, or by manipulating pre-

existing statistical data using computational techniques.
●● Modelling: Modelling is the essence of operation research. A model is an
abstraction of idealised representation of a real life problem. Modelling is a real life
(c
situation helps us to study the different behaviour of the problem corresponding to

the description of the problem.

●● Analog models: Analogical models are a method of representing a phenomenon

Notes
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of the world, often called the “target system” by another, more understandable or
analysable system.
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●● Symbolic models: Symbolic Modeling is a therapeutic method that uses symbols,
metaphors, and modeling to facilitate positive change.
●● Iconic models: An iconic model is an exact physical representation and may be
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larger or smaller than what it represents. The characteristics of an iconic model
and the object that it represents are the same.
Check your Understanding
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1. Operations Research approach is ______________.
a) multi-disciplinary
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b) scientific
c) intuitive
d) collect essential data
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2. A feasible solution to a linear programming problem ______________.
a) must satisfy all the constraints of the problem simultaneously
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b) need not satisfy all of the constraints, only some of them
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c) must be a corner point of the feasible region.
d) must optimize the value of the objective function
3. If any value in XB column of final simplex table is negative, then the solution is
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______________.
a) infeasible
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b) infeasible
c) bounded
d) no solution
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4. For any primal problem and its dual______________.

a) optimal value of objective function is same
b) dual will have an optimal solution iff primal does too
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c) primal will have an optimal solution iff dual does too

d) both primal and dual cannot be infeasible
5. The difference between total float and head event slack is ______________
)A
a) free float
b) independent float
c) interference float
(c

d) linear float
Notes
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6. An optimal assignment requires that the maximum number of lines which can be
drawn through squares with zero opportunity cost should be equal to the number of
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______________.
a) rows or columns
b) rows and columns.
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c) rows+columns- 1
d) rows-columns.
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7. To proceed with the Modified Distribution method algorithm for solving an transportation
problem, the number of dummy allocations need to be added are______________.
a) n
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b) n-1
c) 2n-1
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d) n-2
8. Select the correct statement
a) EOQ is that quantity at which price paid by the buyer is minimum
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b) If annual demand doubles with all other parameters remaining constant, the
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Economic Order Quantity is doubled
c) Total ordering cost equals holding cost
d) Stock out cost is never permitted
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9. Service mechanism in a queuing system is characterized by ______________.

a) customers behavior
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b) servers behavior
c) customers in the system
d) server in the system
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10. The objective of network analysis is to______________.

a) minimize total project duration
b) minimize toal project cost
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c) minimize production delays, interruption and conflicts

d) maximize total project duration
11. In program evaluation review technique network each activity time assume a beta
)A
distribution because______________.
a) it is a unimodal distribution that provides information regarding the uncertainty
of time estimates of activities
b) it has got finite non-negative error
(c
c) it need not be symmetrical about model value

d) the project is progressing well

Notes
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12. If there is no non-negative replacement ratio in solving a Linear Programming
Problem then the solution is ______________.
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a) feasible
b) bounded
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c) unbounded
d) infinite
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Exercise
1. What do you mean by Operations Research?
2. Write down 5 definitions of Operation research
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3. What are the features of Operation research?
4. Explain various models of Operation research
5. What are the methods for solving OR problems?
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6. What are the phases of Operation research?
7. Where can Operation research be applied?
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8. What is the scope of Operation research in Managerial decision making?
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9. What are the decisions made under uncertainty?
Learning Activities
1. Evaluate various operation research models used in the marketing function of
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Amul Ltd.
2. Analyse the phases of Operation research programme used in TATA Power Ltd and
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identify the competitive advantage of the same.
Check your understanding – Answers

1. A) multi-disciplinary
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2. A) must satisfy all the constraints of the problem simultaneously

3. B) infeasible
4. C) primal will have an optimal solution iff dual does too
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5. A) free float
6. A) rows or columns
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7. B) n-1
8. C) Total ordering cost equals holding cost
9. B) servers behavior
10. A) minimize total project duration
(c

11. A) it is a unimodal distribution that provides information regarding the

Notes
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uncertainty of time estimates of activities
12. C) unbounded
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Further Readings and Bibliography
1. Operation Research (Dr. D. S. Hira, Er. Prem Kumar Gupta)
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2. Statistics for Management | Eighth Edition | By I. Levin Richard (Author), H.
Siddiqui Masood (Author), S. Rubin David (Author)
3. Operations Research, MBA III-Sem (O.U) As Per The Latest CBCS Syllabus
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2021-22 Edition - SIA (Author)
4. Operations Research—Introduction to Management Science - 1 January 2019
- A Panel of Authors (Author)
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5. Operations Research: An Introduction - January 2014 by Taha (Author)
6. Operations Research | An Introduction to Research | By Pearson - 31 August
2019 - Hamdy A. Taha (Author)
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7. Operations Research: Concepts, Problems and Solutions - 1 January 2012 - by
V.K. Kapoor (Author)
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8. Operations Research - 1 January 2012 - S Kalavathy (Author)
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Module - II: Linear Programming

Notes
e
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●● Linear Programming (LP)
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●● Allocation of Resources in LP
●● Structure of LP Model
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●● Advantages of LP
●● Assumptions and Limitations of LP Model
●● LP Model Formulation with Examples
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●● Graphical Method for Solving LP Model (Only Maximization)
●● Simplex Method for Solving LP Model (Up to Three Variables – Only Maximization)
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●● Dual of LP Model
●● Economic Interpretation of Dual
●● Standard Results on Duality
●● Managerial Significance of Duality
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Introduction
Linear programming is a technique for figuring out what the optimal output of
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a linear function is. By making a few basic assumptions, it is the optimum strategy
for doing linear optimization. The objective function is defined as a linear function.
Relationships in the real world may be quite difficult. Linear programming, on the other
hand, may be used to show such connections, making it simpler to study them.
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Many sectors, including energy, telecommunications, transportation, and

manufacturing, employ linear programming. This article covers the basics of linear
programming, including its definition, formula, techniques for solving problems with this
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methodology, and related linear programming examples.
What is Linear Programming?

Linear programming, abbreviated as LP, is a straightforward way for depicting
m
complex real-world interactions using a linear function. The pieces of the resulting
mathematical model have a linear connection with one another. To reach the optimal
result, linear programming is utilised to execute linear optimization.
)A
Linear Programming Definition

Linear programming is a strategy for optimising a linear function in order to get the
best possible result. Constraints on linear equality and inequality make up this linear
function, often known as an objective function. By decreasing or maximising the goal
(c
function, we may get the optimal result.

2.1 Linear Programming (LP) and Allocation of Resources,

Notes
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Structure of LP Model, Advantages, Assumptions and
Limitations of LP Model
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Introduction
Linear Programming is a collection of mathematical methods that are specifically
nl
developed for modelling and solving restricted optimization problems.
A Linear Programming Problem is a mathematical representation of a Linear

Programming Problem in the form of a linear objective function and one or more
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linear constraints using equations or inequations. The Model Building or Mathematical
Formulation of the Business Problem is the process that leads to the building of this
model. A linear objective function of the choice variables is maximized/minimized in this
model, which is constrained by a series of linear equations/inequations.
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2.1.1 Linear Programming (LP)

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Linear programming (also known as operational research) is a strong quantitative

approach for solving allocation problems.
‘Linear programming’ is made up of the phrases ‘linear’ and ‘programming.’ The

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term ‘linear’ is used to characterise the connection between directly proportional

decision variables. It is a linear connection if, for example, doubling (or tripling)
the output of a product would precisely double (or triple) the profit and necessary
resources. The term ‘programming’ refers to the arranging of operations in such a way
that they produce a ‘optimal’ outcome with the resources available. If a programme
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maximises or minimises any measure or criteria of effectiveness, such as profit,

contribution (i.e. sales-variable cost), sales, and cost, it is said to be ‘optimal.’
Therefore, ‘Linear Programming’ refers to the planning of choice variables that are
)A
directly proportional in order to reach the ‘best’ outcome within the constraints of the
issue to be addressed.
According to William M. Fox

(c
“Linear programming is a planning technique that permits some objective function

to be minimized or maximized within the framework of given situational restrictions.”

Historical context
Notes
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L.V. Kantorovich, a Russian mathematician, developed the linear programming
approach. However, Geoge B. Dentzig invented the current form of the simplex
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approach in 1947. Linear programming (LP) is an essential operations research
approach for maximising resource usage.
Terminology of linear programming
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A linear function is a function that is linear in nature.
Each term of a linear function is made up of just one continuous variable raised to
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the power of one (and only to the power of one).
Objective purpose
A linear programming problem’s objective function is a linear function of the
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decision variable that expresses the decision maker’s goal. Maximization of profit or
contribution, for example, or cost/time minimization.
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Constraints
The constraints indicate resource restrictions that must be distributed across
several decision variables. Production capacity, personnel, time, space, and equipment
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are examples of these resources. These must be able to be represented in terms of
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decision variables as a linear equation (i.e. =) on inequalities (i.e. > or; type). As a
result, the constraints of a linear programming issue are linear equalities or inequalities
that arise from actual restrictions.
Restriction on negativity
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All decision variables must have values equal to or higher than zero, according to
the non-negativity condition.
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Divisibility
The numerical values of the choice variables are continuous and not confined to
integers, which is referred to as divisibility. To put it another way, fractional values of the
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choice variables must be allowed while determining the best option.
Variables in decision making

The decision variables are economic or physical quantities that compete with one
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another for the limited resources available. Under linear programming, the connection
between these variables must be linear. The answer of the linear programming issue is
shown by the numerical values of decision variables.
)A
Solution that is possible

A viable solution is any non-negative solution that meets all of the criteria. The
viable zone is the area that contains all possible solutions.
Ideal solution
(c
Optimal Solution is a viable solution that maximises the goal function. Although an
optimum solution is always possible, it is impossible for all viable alternatives to be optimal.

Types of variables in linear programming

Notes
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Variable slack
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With the addition of a slack variable, an inequality statement may be transformed
into an equality expression. Setting a lower limit of zero (>0) defines the slack variable.
Variable surplus
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The amount by which the solution’s values surpass the resources used is referred
to as a surplus variable. Negative slack variables are another name for these variables.
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It has a zero coefficient in the objective function. The excess variable is added to the
larger than or equal to type constraints to achieve the equality constraint.
Variable (artificial)
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The fake variable is added when problems with mixed constraints are specified and
the simplex approach must be used. The artificial variable is a kind of variable that is
put into a linear programme model in order to find the first basic viable solution. It’s
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used for equality requirements as well as inequality constraints that are larger than or
equal. In the physical sense, manufactured variables have no value.
Assumptions of linear programming

Proportionality
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The linear programming assumption is that any change in the constraint inequality
will result in a corresponding change in the objective function. This indicates that if a
product contributes Rs 20 to the profit, the overall contribution is equal to 20x1, where
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x1 is the product’s unit count.
If there are 5 units of the product, the contribution is Rs 100, and if there are 10
units, the contribution is Rs 200. As a result, double the production (sales) will double
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the profit.
Additivity
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The additivity assumption states that the overall profit of the objective function is
equal to the sum of the profits generated by each product individually. Similarly, the total
number of resources used is found by adding the entire amount of resources consumed
by each product individually. This means that the choice variables have no interaction.
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Continuity
Linear programming also assumes that the choice variables are continuous. This
implies that both fractional and integer values may be utilised with a variety of outputs.
)A
If 52/3 units of product A and 101/3 units of product B are to be produced in a

week, for example. The fractional quantity of production will be taken as a work-
in-progress in this situation, and the remaining production will be taken the following
week. As a result, a three-week output of 17 units of product A and 31 units of product B
(c
equals 52/3 units of product A and 101/3 units of product B each week.

Certainty
Notes
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The parameters of objective function coefficients and the coefficients of constraint
inequalities are known with confidence, which is another basic assumption of linear
in
programming. Profit per unit of product, material and labour availability per unit, and material
and labour need per unit are all known and supplied in the linear programming issue.
Final options
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This assumption suggests that the decision maker has a limited number of options,
and the decision variables are assumed to have non-negative values. Of the sense that
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the output in the production issue cannot be negative, the non-negative assumption
holds valid. As a result, this hypothesis is regarded plausible.
As a result, these assumptions should be kept in mind while solving the linear
programming issue so that the best option is picked.
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2.1.2 Allocation of Resources in LP
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Resource allocation
The distribution of resources among competing options in order to minimise total
expenses or maximise total return is referred to as an allocation issue. A collection of
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resources accessible in stated quantities; a set of tasks to be completed, each requiring
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a specified quantity of resources; and a set of costs or returns for each job and
resource are all components of such issues. The issue is figuring out how much of each
resource to devote to each task.
If there are more resources available than are required, the solution should specify
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which resources will not be utilised, taking into consideration the related costs. Similarly,
if there are more tasks than available resources can handle, the solution should
suggest which jobs should be skipped, taking into consideration the related costs.
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The ensuing issue is one of assignment if each work needs precisely one resource
(e.g., one person) and each resource may only be utilised on one job. A transportation
or distribution difficulty occurs when resources are divisible and both occupations and
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resources are stated in units on the same scale. A generic allocation difficulty occurs
when occupations and resources are not specified in the same units.
Assigning personnel to offices or positions, trucks to delivery routes, drivers to

trucks, or students to rooms is an example of an assignment issue. The allocation of
m
empty railroad freight trains where they are required or the assignment of orders to
manufacturers for manufacturing are two common transportation problems. The general
allocation issue may include choosing which machines should be used to create a
certain product or what set of items should be made in a factory at a specific time.
)A
The unit costs or returns in allocation issues may be independent or

interdependent; for example, the return on a dollar spent on selling effort may be
contingent on the amount spent on advertising. The issue is said to be dynamic if the
allocations made in one period impact those made in later periods, therefore time must
(c
be addressed in its solution.

Inventory control
Notes
e
Raw materials, component components, work in progress, completed items,
packing and packaging materials, and miscellaneous supplies are all included in
in
inventories. Controlling inventories, which is critical to a company’s financial soundness,
entails selecting where stocks will be housed in the manufacturing system and what
shape and quantity they will take. Because some unit costs rise with inventory size—
nl
such as storage, obsolescence, deterioration, insurance, and investment—and others
fall with inventory size—such as setup or preparation costs, shortage delays, and so
on—a big part of inventory management is figuring out the best purchase or production
lot sizes and base stock levels to balance the opposing cost influences. Determining
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the levels (reorder points) at which orders for inventory replenishment should be
commenced is another aspect of the overall inventory issue.
Inventory management is concerned with two questions: when and how much to
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restock the store. There are two different types of control systems. The two-bin system
(also known as the min-max system) employs the usage of two bins, which may be real
or virtual. The first bin is for meeting immediate need, while the second is for meeting
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demand throughout the replenishing period. When the stock in the first bin runs out,
an order is placed for a certain amount. The reorder-cycle method, also known as the
cyclical-review system, entails ordering at predetermined intervals. In order to design an
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inventory-control mechanism, many combinations of these systems may be employed.
For example, a pure two-bin system may be adjusted to need cyclical rather than
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continuous stock assessment, with orders being created only when the stock falls below
a certain threshold. Similarly, if the stock falls below the reorder level between cyclical
reviews, a pure reorder-cycle system may be adjusted to enable orders to be created.
Another variant is to base the reorder amount in the reorder-cycle system on the stock
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level during the review period, the requirement to purchase additional items or supplies
at the same time, or both.
The fundamental inventory issue involves selecting how much of a resource to

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acquire, whether by acquiring or generating it, and whether or when to acquire it in order
to minimise the total of the expenses that rise with inventory size and those that fall with
inventory size. The cost of capital invested in inventory, handling, storage, insurance,
taxes, depreciation, degradation, and obsolescence are all examples of the first category
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of cost. Shortage costs (resulting from missed sales), manufacturing setup costs, and the
purchase price or direct production expenses are all costs that drop as inventory grows.
The cost of placing a purchase order or beginning a manufacturing run is included in
setup expenses. When big quantities are requested, stocks rise, but ordering frequency
m
falls, lowering setup costs. In general, the bigger the order, the cheaper the unit buy
price due to quantity discounts and lower manufacturing costs per unit due to the higher
efficiency of extended production runs. Demand for the resource and the time between
)A
making and completing orders are two more important aspects to consider.
Inventory issues can arise in a variety of situations, such as determining the

quantities of goods to be purchased or produced, the number of people to hire or train,
the size or number of new production or retailing facilities to provide, and the amount
of liquid (operating) capital to keep on hand. Single-item inventory models are well-
(c
developed and are often solved using calculus. The issue becomes more complex
when the order quantities for several things are interdependent (as when there is limited

storage space or manufacturing time, for example). Breaking down bigger issues into
Notes
e
interacting inventory and allocation concerns might help solve some of them. Simulation
may be used to test many important decision rules in extremely big issues.
in
Example
The challenge of allocating finite resources across different activities is the
sort of problem most typically associated with the use of linear programmes. The
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Product Mix issue is a unique situation. In this example, we’ll look at a factory that
uses four machines to make five distinct items. The alternative activities are the
various production volumes, and the restricted resources are the times available on
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the machines. The table shows the machine requirements in hours per unit for each
product. Each product must travel through all four machines, with the exception of
product 4, which does not need machine 1. The table also includes the unit profits.
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The facility comprises four type 1 machines, five type 2 machines, three type 3
machines, and seven type 4 machines. Every machine works for 40 hours a week. The
challenge is to figure out what the best weekly manufacturing numbers for the items are.
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The aim is to make the most money possible. The first stage in building a model is defining
the decision variables; the second step is writing the constraints and objective function in
terms of these variables and the issue data. The terms “at least,” “no more than,” “equal to,”
and “less than or equal to” in the issue statement suggest one or more limits.
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Machine data and processing requirements (hrs./unit)
Machine Quantity Product 1 Product 2 Product 3 Product 4 Product 5

M1 4 1.2 1.3 0.7 0 0.5
M2 5 0.7 2.2 1.6 0.5 1
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M3 3 0.9 0.7 1.3 1 0.8

M4 7 1.4 2.8 0.5 1.2 0.6
Unit profit, $ —— 18 25 10 12 15
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Variable Definitions
Pj : quantity of product j produced, j = 1,...,5

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Machine Availability Constraints
The number of hours available on each machine type is 40 times the number of
machines. All the constraints are dimensioned in hours. For machine 1, for example, we
have 40 hrs./machine ¥ 4 machines = 160 hrs.
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M1 : 1.2P1 + 1.3P2 + 0.7P3 + 0.0P4 + 0.5P5 < 160
M2 : 0.7P1 + 2.2P2 + 1.6P3 + 0.5P4 + 1.0P5 < 200

)A
M3 : 0.9P1 + 0.7P2 + 1.3P3 + 1.0P4 + 0.8P5 < 120
M4 : 1.4P1 + 2.8P2 + 0.5P3 + 1.2P4 + 0.6P5 < 280
Nonnegativity
(c
Pj > 0 for j = 1,...,5

Objective Function
Notes
e
The unit profit coefficients are given in the table. Assuming proportionality, the profit
maximization criterion can be written as:
in
Maximize Z = 18P1+ 25P2 + 10P3 + 12P4 + 15P5
Solution
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General Resource Allocation Model
It’s customary to use a generic algebraic model to explain a problem class, in
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which numeric values are represented by lower case letters chosen from the beginning
of the alphabet. Variables are assigned alphabetical representations based on their
position in the alphabet. Summation marks are used in conjunction with terms. The
resource allocation model in general is shown below. The outcome is an instance of the
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generic model when the parameters are given particular numerical values.
Parameters
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n: Number of activities. Activities are indexed by j = 1…..n
m: Number of resources. Resources are indexed by I = 1….m
Pj: Profit for activity j
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bi: Amount availability of resource i
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aij: Amount of resource i used by a unit of activity j
Variables
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xj: Amount of activity j selected
Model
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n
Maximize Profit = å c j x j
j- 1
Subject to:
n
å cij x j £ bi for i = 1...m
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j= 1
x j > 0 for j = 1...n
2.1.3 Structure of LP Model

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General Structure of an LP Model

An LP model’s overall structure is made up of three fundamental components (or parts).
)A
Variables that influence decisions (activities) The nature of the goal function and
the availability of resources drive the assessment of numerous courses of action
(alternatives) and selection of the best to arrive at the optimum value of the objective
function. Certain actions (also known as choice variables) are carried out for this. They
are commonly indicated by x1, x2,..., xn. The amount to which each of these variables
(c
(activities) is done is represented by their value. An LP model, for example, might be

used to identify units of each of the goods to be created utilising restricted resources

such as manpower, equipment, money, and material in a product-mix manufacturing

Notes
e
challenge.
Certain variables’ values may or may not be within the decision-control. maker’s
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Variables are considered to be controllable if their values are within the decision-control;
maker’s otherwise, they are said to be uncontrolled. These choice factors, which are
often connected in terms of resource usage, need simultaneous answers. All decision
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variables in an LP model are continuous, controllable, and nonnegative.
That is, x1 ≥ 0, x2 ≥ 0, . . ., xn ≥ 0
The role of the objective Each LP problem’s objective function is stated in terms of
O
decision variables, with the goal of optimising the criteria of optimality (also known as
measure-of-performance) such as profit, cost, revenue, distance, and so on. In its most
basic form, it is written as:
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Enhance (Maximize or Minimize) Z = c1x1 + c2 x2 +... + cn xn, where Z is the
measure-of-performance variable and x1, x2,..., xn are the variables. The parameters
c1, c2,..., cn denote the contribution of a unit of the corresponding variable x1, x2,..., xn
to the total measure-of-performance Z. The graphical or simplex technique is used to
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find the optimum value of a given objective function.
The limitations There are always restrictions (or constraints) on the utilisation of
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resources, such as labour, equipment, raw material, space, money, and so on, that limit
how far an aim may be reached.
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In terms of decision variables, such limitations must be stated as linear equalities
or inequalities. These limitations must be met by the solution of an LP model.
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2.1.4 Advantages of LP
The following are some of the benefits of linear programming:
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●● Linear programming aids in the most efficient use of productive resources. It also
shows how a decision-maker may successfully use his productive elements by
choosing and distributing (allocating) them.
●● Techniques like linear programming help to enhance the quality of judgments. The
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user’s decision-making style becomes more objective and less subjective as a

result of this strategy.
●● Because there may be additional restrictions working outside the issue that must
be taken into consideration, linear programming approaches give plausible and
m
realistic solutions. The fact that we can create a large number of units does not
imply that they can be sold. As a result, for the purpose of convenience to the
decision-maker, appropriate modifications to its mathematical answer are needed.
)A
●● The most notable benefit of this method is that it highlights bottlenecks in

manufacturing processes. When a bottleneck arises, for example, some machines
are unable to satisfy demand while others sit idle for a period of time.
●● Linear programming may also be used to re-evaluate a fundamental strategy in
(c
response to new circumstances. If circumstances change while the plan is being

implemented in part, they may be identified so that the rest of the plan can be
adjusted for the optimal outcomes.

●● Optimal resource utilization: Linear programming aids in the efficient use of

Notes
e
productive resources. It also shows how a decision-maker may successfully use
his productive elements by choosing and distributing (allocating) them.
in
●● Improve decision quality: Linear programming approaches improve decision
quality. The user’s decision-making style becomes more objective and less
subjective as a result of this strategy.
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●● Linear programming Methods Give Viable AND PRACTICAL SOLUTIONS:
Because there may be additional restrictions working outside the issue that must
be considered, linear programming techniques provide possible and practical
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solutions. Just though we have the capacity to make a large number of units does
not imply that they will be sold. As a result, for the purpose of convenience to the
decision-maker, appropriate modifications to its mathematical answer are needed.
●● Re-evaluation of plans: Linear programming may also be used to re-evaluate a
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fundamental plan in response to changing circumstances. If circumstances change
while the plan is being implemented in part, they may be identified so that the rest
of the plan can be adjusted for the optimal outcomes.
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●● Scientific approach: Operations Research employs a scientific approach to
problem-solving. All facets of the issue, whether directly or indirectly linked, are
investigated, and the best solution is found.
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2.1.5 Assumptions and Limitations of LP Model
Assumptions of linear programming

Proportionality
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The linear programming assumption is that any change in the constraint inequality
will result in a corresponding change in the objective function. This indicates that if a
product contributes Rs 20 to the profit, the overall contribution is equal to 20x1, where
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x1 is the product’s unit count.
If there are 5 units of the product, the contribution is Rs 100, and if there are 10
units, the contribution is Rs 200. As a result, double the production (sales) will double
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the profit.
Additivity
The additivity assumption states that the overall profit of the objective function is
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equal to the sum of the profits generated by each product individually. Similarly, the total
number of resources used is found by adding the entire amount of resources consumed
by each product individually. This means that the choice variables have no interaction.
)A
Continuity
Linear programming also assumes that the choice variables are continuous. This
implies that both fractional and integer values may be utilised with a variety of outputs.
If 52/3 units of product A and 101/3 units of product B are to be produced in a

(c
week, for example. The fractional quantity of production will be taken as a work-
in-progress in this situation, and the remaining production will be taken the following

week. As a result, a three-week output of 17 units of product A and 31 units of product B

Notes
e
equals 52/3 units of product A and 101/3 units of product B each week.
Certainty
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The parameters of objective function coefficients and the coefficients of constraint
inequalities are known with confidence, which is another basic assumption of linear
programming. Profit per unit of product, material and labour availability per unit, and material
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and labour need per unit are all known and supplied in the linear programming issue.
Finite choices
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This assumption suggests that the decision maker has a limited number of options,
and the decision variables are assumed to have non-negative values. Of the sense that
the output in the production issue cannot be negative, the non-negative assumption
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holds valid. As a result, this hypothesis is regarded plausible.
As a result, these assumptions should be kept in mind while solving the linear
programming issue so that the best option is picked.
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Limitations of linear programming
Following are the disadvantages or limitations of linear programming:
●● Single objective
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Linear programming simply considers a single goal, such as profit maximisation or
cost reduction. However, in today’s fast-paced business world, no one universal goal
exists for all firms.
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●● Certainty
The values of choice variables’ co-efficients are assumed to be known with
confidence in linear programming. Linear programming cannot be used to solve a broad
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range of problems with probabilistic coefficient values because of this constraint.
“Nothing is certain but death and taxes.” -Benjamin Franklin
●● Divisibility
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The decision variables in linear programming may accept non-negative integer

as well as fractional values. However, we often encounter scenarios in which planning
models include integer-valued variables. Trucks in a fleet, generators in a power plant,
individual pieces of equipment, investment options, and so on are just a few examples.
m
The answer will not be optimum if it is rounded off to the closest integer. Linear
programming approaches cannot be employed in such situations.
●● Complex
)A
Determining the specific goal function is difficult.
●● Linear relationship
This method is based on the assumption that inputs and outputs have linear
(c
relationships. This implies that inputs and outputs may be multiplied, split, and added
together. However, the connections between inputs and outputs aren’t always obvious.
The majority of relationships in real life are non-linear.

●● Wrong assumptions
Notes
e
In product and factor markets, this method assumes perfect competition. Perfect
competition, on the other hand, does not exist.
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●● Constant returns
The LP approach is based on the constant-return premise. In reality, a company’s
production returns are either falling or rising.
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●● Complicated technique:
It’s a sophisticated and extremely mathematical process. The maximising or
O
minimization of a clearly described variable is required to solve a problem using linear
programming. A sophisticated approach such as the simplex method, which involves
a large number of mathematical computations, may also be used to solve a linear
programming issue.
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Even if a specific target function is defined, it may be difficult to identify the many
technical, budgetary, and other restrictions that may be present while pursuing the goal.
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It’s possible that given a specified purpose and a set of constraints, the constraints
aren’t immediately expressible as linear inequalities.
Typically, linear programming methods give trial and error solutions, making it
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challenging to identify really optimum solutions to economic difficulties.
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2.2 LP Model Formulation with Examples
Introduction
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Linear programming is a technique for figuring out what the optimal output of
a linear function is. By making a few basic assumptions, it is the optimum strategy
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Relationships in the real world may be quite difficult. Linear programming, on the other
hand, may be used to show such connections, making it simpler to study them.
Many sectors, including energy, telecommunications, transportation, and

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manufacturing, employ linear programming. This article covers the basics of linear
programming, including its definition, formula, techniques for solving problems with this
methodology, and related linear programming examples.
2.2.1 LP Model Formulation with Examples

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Guidelines on linear programming model formulation

)A
The mathematical formulation of an LP model is required as a first step in the

successful usage and implementation of the model.
The following are the steps involved in developing an LP model:
Step 1: Identify the decision variables

(c
(a) Using words, express each limitation. To do so, check if the restriction is of the type
(at least as big as), (no larger than), or (at least as large as) (exactly equal to).

(b) State the goal function verbally.

Notes
e
(c) Using Steps (a) and (b), verbally identify the decision factors (b). To do so, you must
first ask yourself, “What choices must be taken to maximise the objective function?”
in
Decide on the symbolic notation for the choice variables and their units of
measurement after completing Steps 1(a) to (c). Such a definition of measuring units
would aid in deciphering the LP problem’s eventual answer.
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Step 2: Identify the problem data
Identify the issue data in terms of constants and parameters associated with
O
decision variables in order to develop an LP model. It’s worth noting that the decision-
maker has influence over the variables’ values but not over the data set’s values.
Step 3: Formulate the constraints
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Convert the restrictions’ verbal expressions into resource requirements and
availability for each resource. Then, in terms of the choice variables described in Step
1, represent each of them as a linear equality or inequality.
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In order to be an acceptable (feasible) solution, the values of these choice
variables in the optimum LP problem solution must fulfil these requirements. Wrong
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formulation may result in either an infeasible solution or the exclusion of a solution that
is both feasible and potentially optimum.
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Step 4: Formulate the objective function
Determine if the goal function should be maximised or decreased. Then, in terms
of choice variables and profit (cost) contributions connected with them, represent it as a
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linear mathematical expression.
Readers may bypass verbal description if they’ve gained enough model-building

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skill. The following are some LP model formulation examples that might help you
improve your ability to transform a real-world situation into a mathematical model.
Examples of Linear Programming model formulation

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1. A manufacturing business produces three different sorts of goods: A, B, and C.

Every day, the manufacturing department creates enough components to construct
50 units of A, 25 units of B, and 30 units of C. The management faces the challenge
of optimising daily product output in the assembly department, where only 100
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man-hours are available each day for product assembly. There is also the following
information available:
Profit Contribution per Unit of Assembly Time per

Type of Product
)A
Product (Rs) Product (Hrs)

A 12 0.8
B 20 1.7
C 45 2.5
(c
A daily order commitment of 20 units of product A and a total of 15 units of goods B and
C exists at the firm. To maximise the overall profit, represent this issue as an LP model.

LP model formulation
Notes
e
The data of the problem is summarized as follows:
Resources/Constraints Product Type Total
in
A B C
Production capacity (units) 50 25 30
Man-hours per unit 0.8 1.7 2.5 100
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Order commitment (units) 20 15 (Both for B and C)
Profit contribution (Rs/unit) 12 20 45
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Decision variables Let x1, x2 and x3 = number of units of products A, B and C to be
produced, respectively. The LP model
Maximize (total profit) Z = 12x1 + 20x2 + 45x3
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subject to the constraints
(i) Labour and materials
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(a) 0.8x1 + 1.7x2 + 2.5x3 ≤ 100, (b) x 1 ≤ 50, (c) x2 ≤ 25, (d) x3 ≤ 30
(ii) Order commitment
(a) x1 ≥ 20; (b) x2 + x3 ≥ 15 and x1, x2, x3 ≥ 0.
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2. A corporation has two factories, each of which manufactures and distributes two
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different products: A and B.
Each plant has the ability to operate for up to 16 hours each day. In plant 1, 1,000
gallons of A require three hours to prepare and pack, whereas one quintal of B takes
one hour. In plant 2, 1,000 gallons of A require two hours to prepare and pack, whereas
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a quintal of B takes 1.5 hours. In plant 1, preparing and packing 1,000 litres of A costs
Rs 15,000, and preparing and packing a quintal of B costs Rs 28,000, but in plant 2,
these prices are Rs 18,000 and Rs 26,000, respectively. The firm must generate at least
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10,000 litres of A and 8 quintals of B every day.
Formulate the issue as an LP model to determine how the firm should plan its production
in order to achieve the requisite quantities of the two items at the lowest possible cost.
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LP model formulation
The data of the problem is summarized as follows:
Resources/ Product Total

m
Constraints
A B Availability (hrs)
Preparation Plant 1: 3 hrs/thousand gallons 1 hr/quintal 16 16
)A
time (hrs)
Plant 2: 2 hrs/thousand gallons 1.5 hr/quintal 16 16
Minimum daily 10 thousand gallons 8 quintals
production
Cost of Plant 1: 15,000/thousand gallons 28,000/quintals
(c
production (Rs)
Plant 2: 18,000/thousand gallons 26,000/quintals

Decision variables Let

Notes
e
x1, x2 = quantity of product A (in ’000 gallons) to be produced in plant 1 and 2,
respectively.
in
x3, x4 = quantity of product B (in quintals) to be produced in plant 1 and 2,
respectively.
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The LP model
Minimize (total cost) Z = 15,000x1 + 18,000x2 + 28,000x3 + 26,000x4
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(i) Preparation time
(a) 3x1 + 2x2 ≤ 16, (b) x3 + 1.5x4 ≤ 16
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(ii) Minimum daily production requirement
(a) x1 + x2 ≥ 10, (b) x3 + x4 ≥ 8
and x1, x2, x3, x4 ≥ 0.
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2.3 Graphical and Simplex Method for Solving LP Model
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Introduction
Graphical Method: Because linear programming models are so important in
so many sectors, several different algorithms have been created to solve them
throughout time. The Simplex technique, the Hungarian approach, and others have
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all been mentioned. We’ll focus on the graphical technique, which is one of the most
fundamental approaches to solving a linear programming issue.
In theory, this strategy works for practically all sorts of issues, but as the number
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of choice factors and constraints grows, it becomes more difficult to solve. As a result,
we’ll show it in a basic scenario, with just two variables. So, let’s get this graphical
technique started!
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2.3.1 Graphical Method for Solving LP Model (Only Maximization)

m
)A
(c

Solve Linear Programs by Graphical Method

Notes
e
Multiple strategies may be used to solve a linear programme. We’ll look at the
Graphical approach for solving a linear programme in this part. A two-variable linear
in
programme is solved using this approach. If you just have two choice factors, the
graphical technique should be used to discover the best answer.
Formulating a collection of linear inequalities subject to constraints is a graphical
nl
approach. The inequalities are then plotted on an X-Y coordinate plane. The
intersecting area provides us a viable zone once we’ve drawn all the inequalities on
a graph. The viable zone describes the range of possible values for our model. It also
provides us with the best solution.
O
Let’s understand this with the help of an example.
Example:
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A farmer just purchased a 110-hectare piece of property. On that plot of land, he
has opted to produce wheat and barley. The complete wheat and barley crop may be
sold because to the high quality of the sun and the favourable temperature of the area.
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Given the expenses, net revenues, and labour needs stated below, he wants to know
how to plant each type in the 110 hectares:
Variety Cost (Price/Hec) Net Profit (Price/Hec) Man-days/Hec

Wheat 100 r 50 10
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Barley 200 120 30
During the planning horizon, the farmer has a budget of $10,000 and 1,200 man-
days available. Find the best solution and the best price.
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Solution
To solve this problem, first we gonna formulate our linear program.

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Formulation of Linear Problem
Step 1: Identify the decision variables
The total area for growing Wheat = X (in hectares)

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The total area for growing Barley = Y (in hectares)
X and Y are my decision variables.
Step 2: Write the objective function

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Since the production from the entire land can be sold in the market. The farmer
would want to maximize the profit for his total produce. We are given net profit for both
Wheat and Barley. The farmer earns a net profit of US$50 for each hectare of Wheat
)A
and US$120 for each Barley.
Our objective function (given by Z) is, Max Z = 50X + 120Y
Step 3: Writing the constraints
1. It is given that the farmer has a total budget of US$10,000. The cost of producing
(c
Wheat and Barley per hectare is also given to us. We have an upper cap on the
total cost spent by the farmer. So our equation becomes:

100X + 200Y ≤ 10,000

Notes
e
2. The next constraint is the upper cap on the availability of the total number of
man-days for the planning horizon. The total number of man-days available
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is 1200. As per the table, we are given the man-days per hectare for Wheat
and Barley.
10X + 30Y ≤ 1200
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3. The third constraint is the total area present for plantation. The total available
area is 110 hectares. So the equation becomes,
X + Y ≤ 110
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Step 4: The non-negativity restriction
The values of X and Y will be greater than or equal to 0. This goes without saying.
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X ≥ 0, Y ≥ 0
We have formulated our linear program. It’s time to solve it.
Solving an LP through Graphical method
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Since we know that X, Y ≥ 0. We will consider only the first quadrant.
To plot for the graph for the above equations, first I will simplify all the equations.
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100X + 200Y ≤ 10,000 can be simplified to X + 2Y ≤ 100 by dividing by 100.
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10X + 30Y ≤ 1200 can be simplified to X + 3Y ≤ 120 by dividing by 10.
The third equation is in its simplified form, X + Y ≤ 110.
Plot the first 2 lines on a graph in the first quadrant

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At the point of intersection when the budget and man-days restrictions are active,
the best viable solution is found. This indicates that the intersection of the equations X +
2Y 100 and X + 3Y 120 yields the best answer.
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The values for X and Y that result in the best solution are as follows: (60,20).
Wheat and Barley should be grown on 60 hectares and 20 hectares of land,

respectively, to optimise profit.
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The maximum profit the company will gain is,
Max Z = 50 * (60) + 120 * (20)

= US$5400
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)A
(c

2.3.2 Simplex Method for Solving LP Model (Up to Three Variables –

Notes Only Maximization)
e
The Simplex technique is a way for manually calculating the best value for a
in
linear programme. The approach generates an optimum solution that satisfies the
requirements and has the highest zeta value. To apply the Simplex approach, a linear
programming model must first be in standard form before adding slack variables. An
nl
ideal solution may be found by combining the tableau and pivot variables.
Slack Variable
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Slack variables are extra variables that are inserted into a linear program’s linear
constraints to convert inequality constraints to equality constraints.
Surplus Variable
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Surplus variables are variables that are deducted from a linear program’s linear
constraints to change them from inequality to equality constraints.
If the inequality is ≤ (less than or equal), then we add a slack variable + S to
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change ≤ to =.
For example: 2x1 + x2 ≤ 3 is an inequality.

r
Then, 2x1 + x2 + s = 3; s is the slack variable
ve
If the inequality is ≥(greater than or equal), then we subtract a surplus variable - S
to change ≥ to =.
For example: 2x1 + 3x2 ≥ 5 is an inequality.

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Then, 2x1 + 3x2 - s = 5; s is the surplus variable
Standard Form of a maximization problem in two variables

U
Before searching for the optimum solution, all linear programmes must be in
standard form, which has three requirements: All linear constraints must be in a less-
than-or-equal-to inequality, and all variables must be non-negative.
ity
Example:
Z = 7x1 + 5x2
subject to
m
x1 + 2x2 ≤ 6
4x1 + 3x2 ≤ 12
)A
x1, x2 ≥ 0
Basic Solution
Given a set of m linear equations with n variables (m n), solve the system. A basic
solution is one that is produced by solving for m variables while leaving the remaining
(c
(n–m) variables zero.

Basic feasible Solution

Notes
e
A basic feasible solution is a basic solution that also meets the non-negative
constraints.
in
Bounded, Unbounded, Empty Solutions
A bounded solution is one in which the value of objective function Z has both a
nl
maximum and lowest value.
Unbounded solutions are those in which the value of the objective function Z may
be raised or lowered indefinitely. The lowest and maximum values of an unbounded
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solution are the same.
There will be no maximum or lowest value in an empty solution.
ty
Fundamental Theorem of LP
According to the basic theorem of linear programming, if a solution exists, it is
found on the border of the feasible area, not inside it.
si
Basic Variables
In terms of the optimum solution, basic variables are variables that are not negative.
Non-Basic Variables
r
ve
Variables that are non-basic in terms of the optimum solution are called
non-basic variables.
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Simplex Tableau
Simplex tableau is used to assess optimality and conduct row operations on the
linear programming model.
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Optimality Check
The values supplied to the variables in the objective function to yield the greatest
zeta value are the optimal solutions of a maximisation linear programming model. The
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best answer would be found at the intersections of the whole model’s graph.
Exercise 1 (Step-wise explanation)

Use the simplex method to find the optimal solutions of the following LP Problem.
m
Max. Z = 7x1 + 5x2
subject to
)A
x1 + 2x2 ≤ 6
4x1 + 3x2 ≤ 12
x1, x2 ≥ 0
(c

Solution:
Notes
e
Step 1: Standard form
Standard form is necessary because it creates an ideal starting point for solving the
in
Simplex method as efficiently as possible.
Max. P = 7x1 + 5x2
nl
subject to
x1 + 2x2 ≤ 6
O
4x1 + 3x2 ≤ 12
x1, x2 ≥ 0
Note:
ty
To transform a minimization linear program model into a maximization linear
program model, simply multiply both the left and the right sides of the objective function
by -1.
si
-1 × [-Z = -8x1 - 10x2 - 7x3]
Z = 8x1 + 10x2 + 7x3

r
Maximize: Z = 8x1 + 10x2 + 7x3
ve
Transforming linear constraints from a greater-than-or-equal-to inequality to a less-
than-or-equal-to inequality can be done similarly as what was done to the objective
function. By multiplying by -1 on both sides, the inequality can be changed to less-than-
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or-equal-to.
-1 × [x1 - 5x2 - x3 ≥ -8 ]
x1 + 5x2 + x3 ≤ 8
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Step 2: Determine Slack Variables
Let x3 and x4 be non-negative slack variables,

ity
x1 + 2x2 + x3 = 6
4x1 + 3x2 + x4 = 12
7x1 + 5x2 = P
m
Now, the given LP problem in its standard form is,
1.x1 + 2.x2 + 1.x3 + 0.x4 + 0.P = 6

)A
4.x1 + 3.x2 + 0.x3 + 1.x4 + 0.P = 12
-7.x1 + -5.x2 + 0.x3 + 0.x4 + 1.P = 0
Step 3: Setting up the Tableau

(c
The tableau consists of the coefficient corresponding to the linear constraint

variables and the coefficients of the objective function.

The equation in initial simplex tableau is as follows:

Notes
e
Basic Variables x1 x2 x3 x4 P RHS(b)
x3 1 2 1 0 0 6
in
x4 4 3 0 1 0 12
-7 -5 0 0 1 0
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Step 4: Check Optimality
To use the tableau to verify for optimality, all values in the final row must be larger
than or equal to zero. If a variable’s value is less than zero, it hasn’t achieved its
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ideal value. As can be seen in the preceding table, the bottom row has two negative
numbers, suggesting that this solution is not ideal. If a tableau isn’t performing well, the
next step is to determine the pivot element around which to build a new one.
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Step 5: Determine the Pivot Element
Looking at the bottom row of the tableau and the indicator will reveal the pivot
element. Choose the bottom row’s least negative value. The pivot column would be the
si
one with the least negative value. The pivot element will be one of the values in the
pivot column. Divide the beta values of the linear constraints by their corresponding
values from the pivot column to determine the indicator.
r
∵ -7 is the most -ve value (smallest value), so, the first column is the pivot column.
ve
∵ = 6 and = 3(min) [3<6]
∴ 4 is the pivot element.
Step 6: Create the New Tableau

ni
1) The pivot variable must be converted to a unit value in order to be optimised

(value of 1). Multiply the row holding the pivot variable by the reciprocal of the
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pivot value to change the value. Because the pivot variable in the example
below was initially 4, increase the whole row by 1/4.
R2 → R2/4
ity

x3 1 2 1 0 0 6
x4 1 3/4 0 1/4 0 3
-7 -5 0 0 1 0
m
2) Once the unit value is found, all other values in the column holding the unit value
are set to zero. This is due to the optimization of x2 in the second constraint,
which needs x2 in the other equations to be zero. R1 → R1 - R2
)A

x3 0 5/4 1 -1/4 0 3
x4 1 3/4 0 1/4 0 3
-7 -5 0 0 1 0
(c

R3 → 7R2 + R3
Notes
e
x3 0 5/4 1 -1/4 0 3
in
x4 1 3/4 0 1/4 0 3
0 1/4 0 7/4 1 21
nl
Once the new tableau has been completed, the model can be checked for an
optimal solution.
∴ All the entries in the last row are non-negative.
O
So, the optimal solution is obtained.
So, maximum P=21 when x1= 3 and x2= 0
ty
Finally, Max P = 7x1 + 5x2 = 7.3 + 0 = 21
Step 8: Identify New Pivot Variable
If the solution is suboptimal, a new pivot element must be chosen. Steps are
si
continued from Step 5 until ideal values are achieved, and optimality is confirmed.
Exercise 2
r
Use the simplex method to find the optimal solutions of the following LP Problem.
ve
Max. Z = 3x1 + 5x2
subject to
ni
3x1 + 2x2 ≤ 18
x1 ≤ 4
x2 ≤ 6
U
x1, x2 ≥ 0
Solution:
ity
Let x3, x4 and x5 be non-negative slack variables,
3x1 + 2x2 + x3 = 18
x1+ x4 = 4
m
x2 + x5 = 6
3x1 + 5x2 = Z
)A
Now, the given LP problem in its standard form is,
3.x1 + 2.x2 + 1.x3 + 0.x4 + 0.x5 + 0.Z = 18
1.x1 + 0.x2 + 0.x3 + 1.x4 + 0.x5 + 0.Z = 4

(c
0.x1 + 1.x2 + 0.x3 + 0.x4 + 1.x5 + 0.Z = 6
3.x1 + 5.x2 + 1.x3 + 0.x4 + 0.x5 + 0.Z = 0

The equation in initial simplex tableau is as follows:

Notes
e
Basic Variables x1 x2 x3 x4 x5 Z Rhs(b)
x3 3 2 1 0 0 0 18
in
x4 1 0 0 1 0 0 4
x5 0 1 0 0 1 0 6
-3 -5 0 0 0 1 0
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∵ -5 is the most -ve value(smallest value), so, the second column is the pivot column.
∵ = 9 and = 5(min) [5<18]
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R1 → R1 - 2R3
R4 → R4 + 5R3
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x3 3 0 1 0 -2 0 6
si
x4 1 0 0 1 0 0 4
x5 0 1 0 0 1 0 6
-3 0 0 0 0 1 30
r
∵ -3 is the most -ve value(smallest value), so, the first column is the pivot column.
ve
∵ = 2(min) and = 4 [2<4]

ni
R1 → R1/3

x3 3 0 1/3 0 -2/3 0 2
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x4 1 0 0 1 0 0 4
x5 0 1 0 0 1 0 6
-3 0 0 0 0 1 30
ity
R2 → R2 - R1
R4 → R4 + 3R1

m
x3 3 0 1/3 0 -2/3 0 2
x4 0 0 -1/3 1 2/3 0 2
x5 0 1 0 0 1 0 6
)A
0 0 1 0 -2 1 36
∴ All the entries in the last row are non-negative.
So, the optimal solution is obtained.

(c
So, maximum Z=36 when x1= 2 and x2= 6
Finally, Max Z= 3x1+ 5x2 = 3.2 + 5.6 = 36

Exercise 3
Notes
e
Belt A and Belt B are two different types of leather belts produced by a
manufacturer. Belt A is of superior quality, whereas Belt B is of inferior quality. Profits
in
are Rs 4 and Rs 3 per belt, respectively. Each type A belt takes twice as long to create
as a type B belt, and the firm could produce 1,000 belts each day if all belts were type
B. Only 800 belts per day (A and B combined) are available from the leather supply.
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Belt A necessitates the use of a fancy buckle, which is limited to 400 each day. Belt B is
limited to 700 buckles every day.
How much should each form of belt produce on a daily basis? Make an LP model
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of this problem and use the simplex method to solve it.
Solution
Let x1 and x2 be the number of belts of type A and B, respectively, manufactured
ty
each day.
Then the LP model would be as follows:
si
Maximize (total profit) Z = 4x1 + 3x2
r
(i) 2x1 + x2 ≤ 1,000 (Time availability), (ii) x1 + x2 ≤ 800 (Supply of leather)
ve
(iii) x1 ≤ 400
(Buckles availability)
x2 ≤ 700
ni
and x1, x2 ≥ 0
Standard form Introducing slack variables s1, s2, s3 and s4 to convert given LP
U
model into its standard form as follows
Maximize Z = 4x1 + 3x2 + 0s1 + 0s2 + 0s3 + 0s4

ity
(i) 2x1 + x2 + s1 = 1,000, (ii) x1 + x2 + s2 = 800
(iii) x1 + s3 = 400, (iv) x2 + s4 = 700
and x1, x2, s1, s2, s3, s4 ≥ 0

m
Solution by simplex method An initial feasible solution is obtained by setting x1 =

x2 = 0. Thus, the initial solution is: s1 = 1,000, s2 = 800, s3 = 400, s4 = 700 and Max Z
= 0. This solution can also be read from the initial simplex.
)A
Since c1 – z1 = 4 is the largest positive number, we apply the following row

operations in order to get an improved basic feasible solution by entering variable x1
into the basis and removing variable s3 from the basis.
R3 (new) → R3 (old) ÷ 1(key element) R1 (new) → R1 (old) – 2R3 (new)

(c
R2 (new) → R2 (old) – R3 (new)

Basic Basic
Basic Min Ratio Notes
e
Variables Variables x1 x2 s1 s2 s3 s4
Variables xB /x2
Coefficient Value
B
in
cB b (= xB )
0 s1 200 0 1 1 0 -2 0 200/1 = 200 --->
0 s2 400 0 1 0 1 -1 0 400/1 = 400
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4 x1 400 1 0 0 0 1 0 -
0 s4 700 0 1 0 0 0 1 700/1 = 700
Z = 1600 zj 4 0 0 0 4 0
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cj-zj 0 3 0 0 -4 0

c2 – z2 > 0 in x2-column. Thus, again applying the following row operations to get
a new solution by entering variable x2 into the basis and removing variable s1 from the
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basis, we get
R1 (new) → R1 (old) ÷ 1(key element) R2 (new) → R2 (old) – R1 (new)
R4 (new) → R4 (old) – R1 (new)
si
Basic Basic
Basic Min Ratio
Variables xB /x2
Coefficient
cB
B
Value
b (= xB )
r
ve
3 x2 200 0 1 1 0 -2 0 -
0 s2 200 0 0 -1 1 1 0 200/1 = 200
4 x1 400 1 0 0 0 1 0 400/1 = 400
ni
0 s4 500 0 0 -1 0 2 1 500/2 = 250

Z = 2200 zj 4 3 3 0 -2 0
cj-zj 0 0 -3 0 2 0
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The solution shown in Table 4.9 is not optimal because c5 – z5 > 0 in s3-column.
Thus, again applying the following row operations to get a new solution by entering
variable s3, into the basis and removing variable s2 from the basis, we get
ity
R2 (new) → R2 (old) ÷ 1(key element) R1 (new) → R1 (old) + 2R2 (new)
R3 (new) → R3 (old) – R2 (new); R4 (new) → R4 (old) – 2R2 (new)
Basic Basic
Basic
m
Variables
Coefficient Value
B
cB b (= xB )
3 x2 600 0 1 -1 2 0 0
)A
0 s3 200 0 0 -1 1 1 0
4 x1 200 1 0 1 -1 0 0
0 s4 100 0 0 1 -2 0 1
Z = 2600 zj 4 3 1 2 0 0
(c
cj-zj 0 0 -1 -2 0 0

Since all cj – zj < 0 correspond to non-basic variables columns, the current basic
Notes
e
feasible solution is also the optimal solution. Thus, the company must manufacture, x1
= 200 belts of type A and x2 = 600 belts of type B in order to obtain the maximum profit
of Rs 2,600.
in
2.4 Dual of LP Model and Its Economic Interpretation
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Introduction
The optimum solutions to the dual issue have well-known economic implications
O
in linear programming (Von Neumann [25], Gale, Kuhn, and Tucker [12], Goldman and
Tucker [14]). Dual optimum solutions have been dubbed “shadow price vectors” [14]
and “equilibrium price vectors” in light of these interpretations ([lo], [ll]). The author
has not discovered similar economic interpretations for either nonoptimal dual feasible
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solutions or dual infeasible solutions in the literature ([l], [3]-[5], [6], [IO]-[18], [21],
[22], [24], [26]). The mathematical framework provided here leads to such economic
interpretations, including classical ones.
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A simple method for tackling an economically interesting class of linear
programming problems is also a result of this approach. This approach is
straightforward in that it does not need pivoting or, in most cases, even basic linear
r
algebra. In fact, it gives easy formulae for determining the ideal value and solution
set for each issue in the class. The optimum value formula is the same as the dual
ve
objective function confined to the dual viable solution set, providing an economic
explanation for that function. The optimum solution set formula is expressed in terms
of a “complimentary slackness” principle, which gives further insight on the economic
basis of the conventional complementary slackness principle [4, 141. Furthermore, for a
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similar class of integer programming problems, a small change of these formulae yields
the best value and solution set. Both sets of formulae may be useful in the study of
stochastic programmes of the same kind.
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Most of the theorems presented here, including the basic technique, may be
extended to “geometric programming” ([7], [20]) and “convex programming with convex
perturbations” ([7], [20]). ([21], [22]). Because their proofs need the notion of “conjugate
ity
convex functions,” they are presented in [19] rather than here ([9], [23]). As a result, the
author has opted to limit this study to the linear programming scenario, since its proof
needs just linear algebra tools.
Except for the standard linear programming duality theorems, which are provided
m
here for convenient reference but only partly proven, this article is self-contained.
However, many of the new theorems presented here, including the basic algorithms, do
not need classical theory in their proofs.
)A
2.4.1 Dual of LP Model
Duality in LPP
Every primal LPP has a dual LPP linked with it. Either of the issues is primary,
(c
while the other is secondary. The ideal solution to one issue gives knowledge about the
other’s best solution.

Let the primal problem be

Notes
e
Max Zx = c1x1 + c2x2 + … +cnxn
Subject to restrictions
in
a11x1 + a12x2 + … + a1nxn ≤ b1
a21x1 + a22x2 + … + a2nxn ≤ b2
nl
.
O
.
am1x1 + am2x2 + … + amnxn ≤ bn
ty
and
x1 ≥ 0, x2 ≥ 0,…, xn ≥ 0
The corresponding dual is defined as
si
Min Zw = b1w1 + b2w2 + … + bmwm
Subject to restrictions
a11w1 + a21w2 + … + am1wm ≥ c1

r
ve
a12w1 + a22w2 + … + am2wm ≥ c2
.
ni
.
U
a1nw1 + a2nw2 + ……….+amnwm ≥ cn
and
w1, w2, …, wm ≥ 0
ity
Matrix Notation
Primal
Max Zx = CX
m
Subject to
AX ≤ b and X ≥ 0
)A
Dual
Min Zw = bT W
Subject to
(c
A T W ≥ CT and W ≥ 0

Important characteristics of Duality

Notes
e
●● Dual of dual is primal.
●● If one of the primal or dual problems has a solution, the other will as well, and their
in
optimal values will be the same.
●● If one of the two problems has an infeasible solution, the objective function of the
other has an infinite value.
nl
●● The objective function value for every viable primal solution is smaller than the
value of the objective function for any feasible dual solution.
O
●● The solution to the other issue is infeasible if either the primal or dual problem has
an infinite solution.
●● If the primal has a viable solution but the dual does not, the primal will not have a
ty
finite optimal solution.
Advantages and Applications of Duality

●● When the number of choice variables is much smaller than the number of slack /
si
excess variables, dual problem solving may be simpler than primal problem solving
●● It is very useful in fields like as economics for making future decisions on the
activities being planned
r
ve
●● It is employed in parallel and series circuit theory in physics
●● In game theory, a column player uses dual to minimise his maximum loss, whilst
his opponent, the row player, uses primal to maximise his minimal winnings.
However, if one issue is solved, the simplex tableau may also be used to solve
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additional problems
●● When an issue in primal fails to provide a solution, it may be validated using dual
●● Economic interpretations and shadow pricing may be calculated, allowing
U
managers to make more informed judgments
Steps for a Standard Primal Form

ity
Step 1 – Change the objective function to Maximization form
Step 2 – If the constraints have an inequality sign ‘≥’ then multiply both sides by -1
and convert the inequality sign to ‘≤’.
Step 3 – If the constraint has an ‘=’ sign then replace it by two constraints involving
m
the inequalities going in opposite directions. For example x1+ 2x2 = 4 is written as
x1+2x2 ≤ 4
)A
x1+2x2 ≥ 4 (using step2) → - x1-2x2 ≤ - 4
Step 4 – Every unrestricted variable is replaced by the difference of two non-

negative variables.
Step5 – We get the standard primal form of the given LPP in which.
(c
●● All constraints have ‘≤’ sign, where the objective function is of maximization form.

●● All constraints have ‘≥’ sign, where the objective function is of minimization from.
Notes
e
Rules for Converting any Primal into its Dual
●● Transpose the constraint co-rows efficient’s and columns
in
●● Transpose the objective function’s co-efficients (c1,c2,...cn) and the right side
constants (b1,b2,...bn)
nl
●● Change the inequalities from ‘≤’ to ‘≥’ sign
●● Instead of maximising the goal function, minimise it
O
Example Problems
Write the dual of the given problems
Example 1
ty
Min Zx = 2x2 + 5x3
Subject to
si
x1+x2 ≥ 2
2x1+x2+6x3 ≤ 6
x1 - x2 +3x3 = 4 r
ve
x1, x2 , x3 ≥ 0
Solution
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●● Primal
Max Zx’ = -2x2 – 5x3
Subject to
U
-x1-x2 ≤ -2
2x1+x2+6x3 ≤ 6
ity
x1 - x2 +3x3 ≤ 4
-x1 + x2 -3x3 ≤ -4
x1, x2 , x3 ≥ 0
m
●● Dual
Min Zw = -2w1 + 6w2 + 4w3 – 4w4
)A
Subject to
-w1 + 2w2 +w3 –w4 ≥ 0
-w1 + w2 - w3 +w4 ≥ -2
6w2 + 3w3 –3w4 ≥ -5

(c
w1, w2, w3, w4 ≥ 0

Example 2
Notes
e
Min Zx = 3x1- 2x2 + 4x3
Subject to
in
3x1+5x2 + 4x3 ≥ 7
6x1+x2+3x3 ≥ 4
nl
7x1 - 2x2 -x3 ≥ 10
x1 - 2x2 + 5x3 ≥ 3
O
4x1 + 7x2 - 2x3 ≥ 2
x1, x2 , x3 ≥ 0
ty
Solution
Primal
si
Max Zx’ = -3x1 + 2x2 - 4x3
Subject to
-3x1 - 5x2 - 4x3 ≤ -7

r
ve
-6x1 - x2 - 3x3 ≤ -4
-7x1 + 2x2 + x3 ≤ - 10
-x1 + 2x2 - 5x3 ≤ - 3

ni
-4x1 - 7x2 + 2x3 ≤ - 2
x1, x2 , x3 ≥ 0
U
Dual
Min Zw = -7w1 - 4w2 - 10w3 – 3w4 -2w5
Subject to
ity
-3w1 - 6w2 - 7w3 –w4 – 4w5 ≥ -3
-5w1 - w2 + 2w3 + 2w4 – 7w5 ≥ 2
-4w1 - 3w2 + w3 - 5w4 + 2w5 ≥ -4

m
w1, w2, w3, w4, w5 ≥ 0
Example 3
)A
Max Z= 2x1+ 3x2 + x3
Subject to
4x1+ 3x2 + x3 = 6
(c
x1+ 2x2 + 5x3 = 4
x1, x2 ≥ 0

Solution
Notes
e
Primal
Max Zx = 2x1+ 3x2 + x3
in
Subject to
4x1+ 3x2 + x3 ≤ 6
nl
-4x1 - 3x2 - x3 ≤ -6
x1 + 2x2 + 5x3 ≤ 4
O
-x1 - 2x2 - 5x3 ≤ -4
x1, x2 ≥ 0
ty
Dual
Min Zw = 6w1 - 6w2 + 4w3 –4w4
Subject to
si
4w1 - 4w2 + w3 –w4 ≥ 2
3w1 - 3w2 + 2w3 - 2w4 ≥ 3
w1 - w2 + 5w3 - 5w4 ≥ 1
r
ve
w1, w2, w3, w4≥ 0
Example 4
ni
Min Zx = x1+ x2 + x3
Subject to
U
x1 - 3x2 + 4x3 = 5
x1 - 2x2 ≤ 3
2x2 - x3 ≥ 4
ity
x1, x2 ≥ 0 ,x3 is unrestricted in sign
Solution
Primal
m
Max Z’ = - x1- x2 – x3’ + x3’’
Subject to
)A
x1 - 3x2 + 4(x3’ - x3’’) ≤ 5
-x1+ 3x2 - 4(x3’ - x3’’) ≤ -5
x1 - 2x2 ≤ 3
(c
-2x2 + x3’ - x3’’ ≤ -4
x1, x2 , x3’, x3’’ ≥ 0

Dual
Notes
e
Min Zw = 5w1 - 5w2 + 3w3 – 4w4
Subject to
in
w1 - w2 + w3 ≥ -1
-3w1 + 3w2 - 2w3 - 2w4 ≥ -1
nl
4w1 - 4w2 + w4 ≥ -1
-4w1 + 4w2 - w4 ≥ 1
O
w1, w2, w3, w4, ≥ 0
2.4.2 Economic Interpretation of Dual
ty
Each parameter in the maximising primal LP model may be defined as follows:
Z = return cj= profit (or return) per unit of variable (activity) xj
si
xj= number units of variable j aij = units of resource, i con
bi = maximum units of resource, i available per unit of variable j
r
Z y and yi are the new variables presented in the dual problem (dual variables).
ve
The value of the objective function fulfils the rigorous equality, i.e. Zx = Zy, when both
the primal and dual solutions are optimum.
The next section discusses the meaning of the dual variables yi I = 1, 2,..., m).
Rewrite the original LP problem as this:
ni
Primal LP Problem
U
Maximize (return) (Profit per unit of variable xj ) (Units of variable
xj ) subject to the constraints

ity
Or (Units of resource i, consumed per unit of variable, xj ) (Units of variable xj )

and ≤ Units of resource, i available
Dual LP Problem
m
Minimize (cost) (Units of resource, i) (Cost per unit of resource, i)

)A
Or (Units of a resource, i consumed per unit of variable yi ) (Cost per unit of

resource, i) and yi ≥ 0, for all i, ..., n ≥ Profit per unit for each variable, xj
(c
It is obvious from these formulations of parameters for both primal and dual
issues that the dual variable (yi ) must be stated in terms of return (or worth) per unit

of resource I in order for the unit of measurement to be consistent. This is referred to

Notes
e
as the resource’s dual price (simplex multiplier or shadow price). In other words, the
marginal change (increase if positive or reduction if negative) in the optimum value of
the primal objective function is indicated by the ideal value of a dual variable linked with
in
a specific primal constraint.
For example, if y2 = 5, the objective function value will rise by 5 units for every extra
nl
unit (up to a given limit) of resource 2 (resource linked with constraint 2 in the primary).
The marginal (or shadow or implicit) price of resource 2 is also known as y2 = 5.
Similarly, the objective function value must meet the inequality Zx Z y for both
O
primal and dual LP problems to be viable. This disparity is denoted by the phrase “profit
worth of resources.” As a result, the feasible solution of both primal and dual is not
optimum as long as the total profit (return) from all activities is less than the value of
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the resources. When all of the resources have been used up, the optimality (maximum
profit or return) is obtained. This is only conceivable if the resources (i.e. input) are
worth the same as the profit (i.e. output).
si
Economic Interpretation of Dual Constraints
As stated earlier, the dual constraints are expressed as:
r
ve
Because the dual variable yi represents shadow price per unit of resource bi and
the coefficients aji reflect the amount of resource bi used per unit of activity xj, the
quantity aji yi (= zj ) should equal the total shadow price of all resources necessary to
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create one unit of activity xj.
If the value of cj – zj > 0 corresponds to any non-basic variable in the maximising

LP problem, the value of the objective function may be raised. This means that the
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value of variable xj may be raised from zero to a positive level as long as the unit profit
(cj ) is more than the shadow price, i.e.
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Profit per unit of activity xj ≥ Shadow price of resources used per unit of activity, xj.
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Principle of Complementary Slackness

The complementary slackness concept provides a link between the optimum value
of the major variables in one issue and their slack or excess counterparts in another
)A
problem. When just the dual solution is known, this method may be used to find the primal
LP problem solution. Consider the following scenario to better understand this notion.
1. If a primal constraint has a positive value of a slack variable at the optimum solution of
a primal issue, the related resource is not fully used and must have zero opportunity
(c
cost (shadow price). This implies that obtaining more of this resource will have no
effect on the goal function’s value. However, if the value of the slack variable in that
constraint is zero, the whole resource is being utilised and must have a positive

opportunity cost, meaning that adding more resources would enhance the value of
Notes
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the objective function by permitting greater output.
Because resources are represented as slack variables in the primal and main
in
variables in the dual, the complementary slackness principle stipulates that the
following condition must hold for each resource:
Primal slack variable × Dual main variable = 0
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2. When resources aren’t fully used, the opportunity cost of those resources outweighs
the unit profit from that variable. However, if just a few units of the variable are
produced, the opportunity cost of the resources utilised must equal the profit from
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each unit of the variable, resulting in a zero surplus cost. The quantity to be gained is
represented by a primal variable in a primal LP problem, while the surplus variables
in a dual LP problem reflect excess expenses. In this scenario, the complementary
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slackness principle specifies that the following condition must hold for every unit of
the variable.
Primal main variable × Dual surplus variable = 0
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Advantages of duality
1. Solving the dual of a primal with fewer constraints is preferable since the number
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of constraints is generally equal to the number of iterations necessary to solve
the issue.
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2. This eliminates the need for extra or fake variables and allows the issue to be solved
rapidly (the primal-dual approach). Duality is helpful in the development of input
and output systems in economics. It may also be used in physics, engineering,
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mathematics, and other fields.

3. The dual variables give a valuable economic interpretation of an LP problem’s
ultimate solution.
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4. It’s quite beneficial for analysing changes in an LP problem’s parameters (the

approach is called sensitivity analysis).
5. The simplex approach is employed to solve an LP issue when the first solution is
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infeasible (the technique is known as the dual simplex method).
2.5 Standard Results on Duality;

Managerial Significance of Duality
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Introduction
There is a linear programming problem for every linear programming problem.
)A
The first dilemma is referred to as the primal problem, and the second as the dual
problem. Despite the fact that the concept of duality is primarily mathematical in nature,
it has major ramifications. When addressing questions concerning different courses of
action and their impact on the values of the objective function, managers can use this
information to their advantage. The primary problem is of the maximisation type, and
(c
vice versa. The dual problem is of the minimization type when the primal problem is of
the maximisation type. Because the simplex approach may be used to solve either the
original issue (the primal) or the dual problem (the dual), this is a particularly noteworthy

characteristic. Whichever problem we begin with and finish with will provide us with
Notes
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the answer to the other problem as well. We examine the actions and performance
of managers who simultaneously serve as the chair of the board of directors (duality
managers). We anticipate that duality managers make more hazardous decisions and
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perform worse than non-duality managers as a result of a lower degree of control and
replacement risk as compared to non-duality managers.
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2.5.1 Standard Results on Duality
●● The primordial problem is the twin of the dual LP problem.
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●● The other issue has no conceivable solution if either the primal or dual problem
has an unlimited objective function value.
●● If one of the primal or dual issues has a finite optimum solution, the other has
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the same, and the optimal values of the two problems’ objective functions are
equivalent, i.e. Max Zx = Min Zy.
The basic primal-dual connection is the name given to this analytical outcome. The
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following is a summary of the findings.
Dual Problem (Max) Primal Problem (Min)
Feasible Feasible
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Max Zy = Min Zx Max Zy → + ∞
Infeasible Min Zx → – ∞ Unbounded or infeasible
●● The primal-dual relationship’s complementary slackness characteristic asserts

that given a positive fundamental variable in the primal, the corresponding dual
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variable will be zero. Alternatively, the equivalent dual variable for a non-basic
variable in the primal (which is zero) will be basic and positive.
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2.5.2 Managerial Significance of Duality

The examination of the dual LP issue reveals information regarding the resource
value. To determine if extra units of any resource are necessary, a detailed economic
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study is required. If yes, how much of a cost per unit must be paid for any resource?
The following is a summary of the importance of dual research:
(i) In a primal LP issue, the right-hand side of the constraint reflects the quantity of a
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resource accessible, and the dual variable value associated with it is interpreted as
the maximum price expected to be paid for an extra unit of this resource.
(ii) The examination of the dual LP issue reveals information regarding the resource
)A
value. To determine if extra units of any resource are necessary, a detailed economic
study is required. If yes, how much of a cost per unit must be paid for any resource?
(iii) The following is a summary of the importance of dual research:
(iv) In a primal LP issue, the right-hand side of the constraint reflects the quantity of a
(c
resource accessible, and the dual variable value associated with it is interpreted as
the maximum price expected to be paid for an extra unit of this resource.

Case Study
Notes
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The Diet Problem:
A WWW-based Interactive Case Study
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in Linear Programming
Introduction
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The rapid expansion of the World Wide Web (WWWW) is presenting a new and
unique opportunity to make educational resources accessible to a huge number of
people. Because of Netscape’s and other Web browsers’ interactive nature, it’s now
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easy to develop engaging activities for students to learn about new fields of study
and application. The Diet Problem is an interactive case study developed by the
Optimization Technology Center (OTC) to expose users to a basic mathematical
model, problem formulation, solution methodologies, and the broader application of
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optimization techniques.
The diet problem will be described as a linear programme in Section 2, as well as
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some challenges with developing the mathematical model. Section 3 explains how the Web
interface is used in this case study and how users may access the model for themselves.
Section 4 concludes with some thoughts on the Web and mathematics.
The Diet Problem

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The Diet Problem was selected for its historical significance, educational value, and
simplicity of explanation.
The following is a simple description of the diet issue:

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Reduce the cost of food consumed in a single day.
Subject to the conditions that the diet meet a person’s nutritional needs and that no
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one food be consumed in excess.
This formulation is contained in The Diet Issue Web page, which walks the
user through the process of converting this verbal formulation of the problem into a
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mathematical problem (a linear programme), and finally into a computer-readable

format. For the sake of thoroughness, this procedure is summarised below.
The first step is to assign variables to the quantity of food we’re trying to solve for,
as well as parameters to the data we already have.
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Assume we have three items to meet and two nutritional requirements:
Food Cost / Serving Vitamin A Calories Maximum Servings

)A
Corn (C) $0.18 107 72 10

2% milk (M) $0.23 500 121 10
Wheat bread (W) $0.05 0 65 10
Minimum Amount Maximum Amount

(c
Nutrient in Diet in Diet

Calories (Cal) 2000 2250
Vitamin A (VA) 5000 50000

We can define our variables as follows:

Notes
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x[food] = amount of food to eat
c[food] = cost of 1 serving of food
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A[food] = amount of Vitamin A in 1 serving of food
Cal[food] = amount of calories in 1 serving of food
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M inF [food] = minimum number of servings for food
M axF [food] = maximum number of servings for food
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M inN[nutrient] = minimum amount of nutrient required
M axN[nutrient] = maximum amount of nutrient required
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In this problem, we will be solving for the values of x[food]. The other values (C,
A, Cal, etc.) are provided as input.
The problem can then be written as follows.
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Minimize cost[C] x[C] + cost[M] x[M] + cost[W] x[W]
Subject to M inN[V A] A[C] x[C] + A[M] x[M] + A[W] x[W] M axN[V A]

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M inN[Cal] Cal[C] x[C] + Cal[M] x[M] + Cal[W] x[W] M axN[Cal]
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M inF [C] x[C] M axF [C]
M inF [M] x[M] M axF [M]

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M inF [W] x[W] M axF [W]
The objective function is the value we’re attempting to lower. The objective function
in this issue is the total cost of the menu. This issue is a linear programme since the
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objective function and the restrictions are both linear functions of the variables, x[food].
This derivation is continued on the Diet Issue Formulation page, which shows
a deeper mathematical formulation as well as an AMPL modelling language [1]
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formulation so that we may solve the problem with a computer.
This is the best answer for our little sample issue.
Variables
Food Servings
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Corn 1.94
Milk 10
Wheat Bread 10
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Dual Variables:
Variable Dual Cost for Upper Bound ($)
Corn 0
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Milk -0.073
Bread -0.11

Dual Cost for Dual Cost for

Notes Constraint
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Lower Bound ($) Upper Bound ($)
Calories 0.0025 0
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Vitamin A 0 0
The dual variables, simply put, describe the cost of adding a constraint in the
model. Without any limits (apart from those that prohibit negative food quantities), it is
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easy to see how the ideal meal has no cost and contains no items. We may get the
following straightforward interpretations from the aforementioned tables:
Because the proportions of milk and wheat bread in the diet are at their top limits,
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these limits come at a price. The upper limit on milk is connected with the dual variable
0:073. The cost of the diet would be reduced by $0.073 if we lifted the upper limit on
milk portions from 10 to 11, and similarly for wheat bread.
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The constraint x[Maize] 10 is not active and has a dual cost of 0.0 since the
quantity of corn in the diet is not at the upper limit. Changing the corn upper limit has no
effect on the objective value.
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The Calories restriction may be argued in a similar way. The cost may be reduced
by $0.0025 if we are ready to accept one less calorie in our diet.
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The associated dual cost is 0.0 since neither the higher nor lower constraints on
the Vitamin A restriction are active.
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Taking Advantage of the We
Linear programmes are simple to create and comprehend. In reality, linear
programming is covered in many high school textbooks. Graphical approaches may
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be used to answer simple two-variable problems, and even bigger problems can be
handled by hand. However, realistic problems with more than a few variables and
restrictions become too difficult to handle by hand fast. Despite the availability of decent
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LP software, it is doubtful that students would accurately define their issues for the
software package in order to play with bigger or more intricate models. Students no
longer need to appropriately encode their issues or download software to solve the diet
problem by leveraging the Web’s remote execution capabilities. They may simply click
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several buttons to choose the meals of their choosing, alter the restrictions, solve the
issue, and receive tables and graphs of the result.
Users may choose from a database of 64 items to include in their meals in The
Diet Problem. Figure 1 illustrates a section of the input form with some of the meals in
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the model. They may also choose to alter the restrictions or use the defaults. The Diet
Problem’s CGI2 software collects the information from these forms and sends it to the
CGI2 programme. The software extracts the data, then formulates and solves the linear
)A
programme. The user is notified and given another opportunity if the linear programme
is infeasible, that is, if the nutritional needs cannot be satisfied with the items chosen.
If the issue is doable, i.e., a solution exists, a results page is generated that displays
the best menu and price (see Figure 2). There are also links to additional pages on the
results page that show the cost breakdown by food (see Figure 3) and how much of
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each nutrient each item supplied. Pie charts are used to display this data. There is also
information regarding the dual variables, as well as an explanation.

Notes
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in
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A portion of the food selection input form
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For individuals who are more interested in linear programming or other applications,
there are further connections to more information. There are links to the rest of the NEOS
Guide3 where you may learn about modelling languages, linear programming tools,
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solution methodologies, and other applications. There are additional links to the NEOS
Server4, an OTC service that uses the Internet to solve users’ mathematical issues (linear
programming, stochastic linear programmes, nonlinear programmes, network problems,
and complementarity problems). The user may rapidly learn about a range of optimization
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models and solution strategies by clicking on these and other links.
The Optimized Menu

The cost of this optimal diet is $1.63 per day
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The Solution and Cost Breakdown by Food
Food Servings Cost($)

Wheat Bread 10 0.5
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Frozen Broccoli 0.51 0.08

Carrots, Raw 0.07 0.01
2% Lowfat Milk 1.79 0.41
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Peanut Butter 2.82 0.2

White Rice 5.48 0.44
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The optimal menu
The Internet facilitates intimate communication between users of the diet problem
and others. Users are encouraged to contribute comments and recommendations for
improvements on the “comments and suggestions” page. Many improvements to the
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case study were made as a result of the overwhelming interest in the case study and
the helpful comments received: many of the pages were reworded for clarity, a section
on dual variables was added so that professors could better use the case study in their
)A
classes, and additional foods were added to the menu.
The World Wide Web makes it simple to distribute the most recent version of
software. Anyone visiting the diet issue is dealing with the most recent version of the
programme, which is stored on the Argonne Web Server. Furthermore, since all Web
(c
browsers comprehend the same Web protocol, there is no need to maintain software for
many different devices. Information design for the World Wide Web encourages rapid
development and accessible user input.

Notes
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in
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The Diet Problem has proved to be a huge hit. The site has addressed more than
2,600 instances of the same issue in the three months that the case study has been on the
Web. Many of the users are students in colleges and universities from all around the globe.
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Conclusion
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Many improvements in educational technology are being enabled by the rise of

the World Wide Web. With each new HTML update and the introduction of the Java
programming language, new opportunities for developing engaging and interactive
content emerge.
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Pages on the internet. The audience for Web apps is growing rapidly as more
individuals get connected to the Internet and have access to the World Wide Web.
We want to take advantage of this increase by using intriguing case studies to expose
new users to the applicability and efficacy of optimization models. The Diet Problem
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is a straightforward introduction to linear programming and model building. Users may

interact with a mathematical model without needing to know how to utilise mathematical
notation. We also provide them with easy-to-understand tables and figures to help them
visualise the answer.
)A
Question for Case study:

1. Highlight what the rapid expansion of the World Wide Web (WWWW) is presenting
in the above case?
(c
2. Explain the importance of Linear programmes

3. Comment on the diet problem

Summary
Notes
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●● Linear Programming is a collection of mathematical methods that are specifically
developed for modelling and solving restricted optimization problems.
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●● A Linear Programming Problem is a mathematical representation of a Linear
Programming Problem in the form of a linear objective function and one or more
linear constraints using equations or inequations
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●● L.V. Kantorovich, a Russian mathematician, developed the linear programming
approach. However, Geoge B. Dentzig invented the current form of the simplex
approach in 1947. Linear programming (LP) is an essential operations research
O
approach for maximising resource usage.
●● The constraints indicate resource restrictions that must be distributed across
several decision variables. Production capacity, personnel, time, space, and
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equipment are examples of these resources.
●● The numerical values of the choice variables are continuous and not confined to
integers, which is referred to as divisibility. To put it another way, fractional values
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of the choice variables must be allowed while determining the best option
●● The decision variables are economic or physical quantities that compete with
one another for the limited resources available. Under linear programming, the
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connection between these variables must be linear. The answer of the linear
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programming issue is shown by the numerical values of decision variables
●● A viable solution is any non-negative solution that meets all of the criteria. The
viable zone is the area that contains all possible solutions
●● Optimal Solution is a viable solution that maximises the goal function. Although an
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optimum solution is always possible, it is impossible for all viable alternatives to

be optimal
●● The linear programming assumption is that any change in the constraint inequality
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will result in a corresponding change in the objective function. This indicates that if
a product contributes Rs 20 to the profit, the overall contribution is equal to 20x1,
where x1 is the product’s unit count
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●● The additivity assumption states that the overall profit of the objective function is
equal to the sum of the profits generated by each product individually. Similarly,
the total number of resources used is found by adding the entire amount of
resources consumed by each product individually. This means that the choice
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variables have no interaction

●● The parameters of objective function coefficients and the coefficients of constraint
inequalities are known with confidence, which is another basic assumption of
)A
linear programming. Profit per unit of product, material and labour availability per
unit, and material and labour need per unit are all known and supplied in the linear
programming issue
●● The linear programming assumption is that any change in the constraint inequality
will result in a corresponding change in the objective function. This indicates that if
(c
a product contributes Rs 20 to the profit, the overall contribution is equal to 20x1,

where x1 is the product’s unit count

●● The additivity assumption states that the overall profit of the objective function is
Notes
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equal to the sum of the profits generated by each product individually. Similarly,
the total number of resources used is found by adding the entire amount of
resources consumed by each product individually. This means that the choice
in
variables have no interaction
●● The parameters of objective function coefficients and the coefficients of constraint
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inequalities are known with confidence, which is another basic assumption of
linear programming. Profit per unit of product, material and labour availability per
unit, and material and labour need per unit are all known and supplied in the linear
programming issue
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●● The decision variables in linear programming may accept non-negative integer as
well as fractional values. However, we often encounter scenarios in which planning
models include integer-valued variables. Trucks in a fleet, generators in a power
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plant, individual pieces of equipment, investment options, and so on are just a few
examples. The answer will not be optimum if it is rounded off to the closest integer.
Linear programming approaches cannot be employed in such situations
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●● Linear programming is a technique for figuring out what the optimal output of a
linear function is. By making a few basic assumptions, it is the optimum strategy
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Relationships in the real world may be quite difficult. Linear programming, on the
other hand, may be used to show such connections, making it simpler to study them.
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●● Graphical Method: Because linear programming models are so important in
so many sectors, several different algorithms have been created to solve them
throughout time. The Simplex technique, the Hungarian approach, and others
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have all been mentioned. We’ll focus on the graphical technique, which is one of
the most fundamental approaches to solving a linear programming issue
●● The Simplex technique is a way for manually calculating the best value for a linear
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programme. The approach generates an optimum solution that satisfies the

requirements and has the highest zeta value. To apply the Simplex approach, a linear
programming model must first be in standard form before adding slack variables. An
ideal solution may be found by combining the tableau and pivot variables
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●● The values supplied to the variables in the objective function to yield the greatest
zeta value are the optimal solutions of a maximisation linear programming model.
The best answer would be found at the intersections of the whole model’s graph
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Glossary
●● Linear programming: is a method to achieve the best outcome (such as
maximum profit or lowest cost) in a mathematical model whose requirements are
)A
represented by linear relationships.

●● Decision Making: Decision making is the process of making choices by
identifying a decision, gathering information, and assessing alternative resolutions
●● Certainty: Certainty means that the problem is assumed to have no probabilistic
(c
elements whatsoever. This is technically never true in the real world; some degree
of uncertainty is always present.

●● Divisibility: means that the variables can take on fractional values. This follows
Notes
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from the fact that a line is a continuous geometric object and the coordinates of
its constituent points need not always be integers. (In fact, most of them are not
integer-valued!) To make the model workable (computationally tractable), we must
in
be prepared to accept non-integer solutions However, this need not be a major
drawback. If production is conceived of as a continuous process, divisibility is
usually not an obstacle.
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●● Additivity: the combined effect of the decision variables in any one equation is the
algebraic sum of their individual weighted effects. (The weighting, of course, is due
to the proportionality constants.)
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●● Proportionality: means that each decision variable in every equation must
appear with a constant coefficient (i.e., the variable is multiplied by a number and
nothing else).
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●● Model Formulation: Model formulation is the step where our knowledge of a
natural system is translated in mathematical form
●● Simplex method: The simplex method is a systematic procedure for testing the
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vertices as possible solutions. Some simple optimization problems can be solved
by drawing the constraints on a graph
Check Your Understanding r

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1. Term ‘Linear’ in LPP represents that
a) Parameters value remains constant during the planning period
b) Value of decision variables is non-negative
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c) Relationship among all variables is linear

d) It has single objective function & constraints
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2. The mathematical model of an LP problem is important because

a) It helps in converting the verbal description & numerical data into
mathematical expression
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b) Decision-makers prefer to work with formal models

c) It captures the relevant relationship among decision
d) It enables the use of algebraic technique
3. Linear programming is a
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a) Constrained optimization technique

b) Technique for economic allocation of limited resources
)A
c) Mathematical technique
d) All of these options
4. The first step in formulating a linear programming problem is
(c
a) Plot a graph
b) Perform the sensitivity analysis

c) Identify and define the decision variables

Notes
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d) Find out the redundant constraints
5. Constraints in LPP mean ______
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a) Limitations are expressed in mathematical equalities ( or inequalities )
b) Assumption
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c) Goal is to be achieved
d) A function to be optimized
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6. Non-negativity restriction in LPP indicates that
a) All decision variables must take on values equal to or greater than zero
b) A positive coefficient of variables in objective function
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c) A positive coefficient of variables in any constraint
d) Non-negative value of resources
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7. A feasible solution to an LP problem
a) Must satisfy all of the problem’s constraints simultaneously
b) Need not satisfy all of the constraints, only some of them
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c) Must be a corner point of the feasible region
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d) Must optimize the value of the objective function
8. Which of the following is assumption of an LP model
a) Divisibility
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b) Proportionality
c) Additivity
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d) All of these options

9. The linear function of the variables which is to be maximize or minimize is called
a) Constraints
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b) Objective function
c) Decision variable
d) Non-negativity constraint
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10. Which of the following is NOT a characteristic of the LPP

a) Resources must be limited
)A
b) Only one objective function

c) Parameters value remains constant during the planning period
d) The problem must be of minimization type
(c

11. In graphical method the restriction on number of decision variables is __________.

Notes
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a) Two
b) Three
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c) Not more then three
d) None of these
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12. In graphical method the restriction on number of constraint is __________.
a) Two
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b) Three
c) Not more then three
d) None of these
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Exercises
1. What do you understand by Linear Programming?
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2. What is the structure of LP Model?
3. What do you mean by LP Model?
4. What are the advantages of LP?
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5. What are the assumptions and limitations of LP Model?
6. How to solve LP using Graphical Model?
7. What is Dual of LP Model?
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8. What is the economic interpretation of LP Model?

9. What are the standard results on Duality?
10. What is the managerial significance of Duality?
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Learning Activities
1. Analyse the use of Linear Programming model in taking managerial decisions at
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Reliance India Ltd.

2. Analyse Simplex method and its usage in the decision making in Apple Ltd.
Check Your Understanding - Answers

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1. C) Relationship among all variables is linear

2. A) It helps in converting the verbal description & numerical data into
mathematical expression
)A
3. D) All of these options

4. C) Identify and define the decision variables
5. A) Limitations are expressed in mathematical equalities ( or inequalities )
(c
6. A) All decision variables must take on values equal to or greater than zero
7. A) Must satisfy all of the problem’s constraints simultaneously

8. D) All of these options

Notes
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9. B) Objective function
10. D) The problem must be of minimization type
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11. A) Two
12. D) None of these
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)A
(c

Module - III: Sensitivity Analysis

Notes
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●● Understand the Objective function
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●● Analyse the changes in objective function
●● Understand the various resources and its availability
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●● Input – Output coefficients
●● Understand the importance of addition of additional variable and constraints
●● Understand relationship to the dual
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Introduction
In operations research, sensitivity analysis enables us to comprehend the impacts
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that occur in an ideal solution. This entry describes what it is and how to use it.
In operations research, a sensitivity analysis is a useful method for finding the best
answer to engineering challenges in a project when it’s crucial to know how various
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factors will affect it. What are the contents of these analyses? Following that, it’s
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essential traits and distinguishing features are presented.
Sensitivity analysis in operations research: what is it?

It is a method of determining the consequences of a change in any parameter
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of a linear programming model on the optimum solution. It looks at how changing the
coefficients of basic and non-basic variables affects the available resources, as well as
whether a new limitation is imposed.
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The goal is to see how dependable the ideal solution is in the face of possible
changes. Remember that the answer assumes that the beginning data would stay
constant for a short period of time. As a result, you can predict how it will respond in the
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face of potential changes by applying this research.
It also assists in determining which characteristics or variables may vary without

influencing the best answer. Others will be significantly more responsive to greater
intervals without creating changes. It is possible to keep them under observation and
m
deal with any difficulties they may bring by discovering them. The right changes will be
made based on its behaviour to avoid the solution from finally failing.
How is the analysis carried out?

)A
Each parameter must be addressed and verified separately in the analysis. The
goal function’s coefficients and the limitations’ limits will also be stated. As a result,
relevant information will be acquired that will help you to determine if the solution is
still the best option. It is feasible to utilise programmes to help in the execution. This
(c
process will also be followed to speed up activities:

Revised model: The changes in the parameters to be studied are set in this
Notes
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section. These will be used to determine the feasibility of the best option as well as the
consequences it has.
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Conversion to the proper Gaussian elimination form: This process enables the
data to be converted into an appropriate table, which can then be used to identify and
assess the existing solution.
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Feasibility test: We check to see whether the solution is viable by looking at all of
the fundamental variables that are still non-negative.
Demonstration that the answer is the best: Because it has already been shown
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that the solution is viable, it is tested to see whether it is optimum. The nonnegative
coefficients of nonbasic variables in the Z area are tested.
Optimization: If the solution fails any of the tests, it will be optimised depending on
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the findings. As a result, it will be fine-tuned until the optimal values, those that provide
sufficient variables in important parameters, are discovered.
An example of the ABC technique of inventory categorization to consider
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This approach may be seen in the ABC technique for inventory categorization.
When it comes to segmenting and arranging items in a warehouse, it is utilised to
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discover the best option. The significance is the most important factor to consider
while placing them in order. Thus, among other things, the company’s importance, the
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economic worth, the advantages offered, or the turnover created are considered.
When making the classification, three types of categories are established:

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Category A
A comprises the most important goods for the firm. These typically make up 20%
of the inventory and are also the ones with the most mobility or turnover. They are
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properly handled and the organisation achieves higher performance by prioritising them.
Category B
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Products of modest significance and turnover fall within Category B. Even though
they only create 20% of revenue, they grow to represent 30% of product. Because
some of its components might fall into class A or C depending on the circumstances, it
is an intermediate category that should be examined on a regular basis.
m
Category C
Finally, C is the most common group, even though it generates the least money.
Because the items that make it up aren’t in great demand, there’s no need to devote a
)A
lot of resources to them. They create just 5% of earnings, and their management may
be done on an irregular basis, always keeping in mind their expiry or obsolescence.
Because their priority is low, they are housed in secondary regions of the warehouse
with limited access.
(c

3.1 Changes in Objective Function, Availability of resources

Notes
e
and Input-Output Coefficients
Introduction
in
You must make approximations while using a mathematical model to explain
reality. The world is a lot more intricate than the kind of optimization issues we can
nl
tackle. In most cases, linearity assumptions are major approximations. Another crucial
approximation arises from the fact that you cannot accurately predict the future.
Make sure the data you provide into the model is accurate. Your understanding of
O
the subject
Due to the imprecision of technology, you may be forced to estimate values in A, b,

or c.
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Furthermore, information is subject to change. A sensitivity analysis is a methodical
investigation.
illustrates how sensitive (duh) solutions are to (little) data changes The fundamentals
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The goal is to be able to respond to questions of the following type:
1. How does the answer change if the goal function changes?

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2. What happens if the available resources change? How does the solution change?
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3. How does the solution change when a constraint is introduced to the problem?
Solving a large number of linear programming problems is one way to address
these challenges.
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If you estimate your major product will cost between $100 and $120 per unit, for
example, you may answer twenty separate problems (one for each whole number
between $100 and $120).
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This approach might work, but it is inelegant and would take a long time to
compute (for huge issues). (In fact, calculating solutions to comparable situations is a
common method for evaluating sensitivity in practise.)
ity
The technique I’ll discuss in these notes takes full use of the structure and solution
of LP programming issues. It turns out that by thinking and scrutinising the information
offered by the simplex technique, you can frequently figure out what occurs in “nearby”
linear programming situations.
m
Assume you’ve solved an LP and now want to tackle an issue with the same
restrictions but a slightly different objective function. (At any given moment, I will only
make one adjustment to the issue.) So if I modify the objective function, I will only
)A
change one coefficient in the objective function while keeping the restrictions constant.)
3.1.1 Changing Objective Function

When the goal function is changed, there are two scenarios to consider. The first
(c
scenario involves a modification in a non-basic variable (a variable that in the solution

takes on the value zero). The important non-basic variables in this example are x1
and x3.

What happens to your answer if a non-basic variable’s coefficient decreases?

Notes
e
Consider reducing the coefficient of x1 in the goal function above from 2 to 1 (resulting
in the objective function: max x1 + 4x2 + 3x3 + x4). This is what has happened: You’ve
taken a variable you didn’t want to use in the first place (x1 = 0) and reduced its
in
profitability (lowered its coefficient in the objective function). You’re not going to utilise it
anyway. The solution remains unchanged.
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Observation
The solution remains unchanged if the objective function coefficient of a non-basic
variable is reduced.
O
What happens if the coefficient is increased? Increasing the coefficient just a little
shouldn’t matter, but raising it a lot can cause you to modify the value of x in such a
manner that x1 > 0. As a result, you should anticipate a solution for a non-basic variable
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to be valid across a wide range of coefficients for non-basic variables. The range for
the coefficient should contain all lower values as well as some higher ones. The answer
changes if the coefficient rises high enough (and incorporating the variable into the
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basis is possible).
What happens to your answer if a fundamental variable’s coefficient (in this case,
x2 or x4) decreases? The difference between this circumstance and the last one is
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that you are utilising the base variable in the first place. As a result of the modification,
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the variable now contributes less to profit. A significant substantial decrease should
cause you to reconsider your answer (and reduce the value of the linked variable). For
example, if the coefficient of x2 in the above objective function was 2 instead of 4 (and
the aim was max 2x1+2x2+3x3+x4), the objective would be max 2x1+2x2+3x3+x4,
instead of x2 = 10.4, you may wish to use x2 = 0. A modest change in x2’s objective
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function coefficient, on the other hand, is unlikely to lead you to revise your answer.
Unlike with the non-basic variable, such a modification will affect the value of your
objective function. If x2 = 10.4 and the coefficient of x2 is reduced from 4 to 2, then the
U
contribution of the x2 component to the value is reduced from 41.6 to 20.8 (assuming
the solution stays the same).
If the coefficient of a fundamental variable increase, your value increases as well,

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and you still want to utilise the variable; but, if it increases enough, you may wish to
alter x such that x2 is conceivable. In many circumstances, this may be accomplished
by establishing a new foundation (and therefore another solution). So, intuitively, there
should be a range of values for the objective function’s coefficient (including the original
value) where the problem’s solution does not change. The answer will alter outside of
m
this range (to reduce the value of the basic variable for reductions and raise the value of
the basic variable for increases in its objective function coefficient).
)A
When you modify the coefficient of a fundamental variable, the value of the
issue changes.
Shadow pricing and optimal decision variables are not always unique. The range
of values of optimum decision variables and optimal shadow pricing for the potato chips
model is investigated in this section. There are built-in features in Aimms that allow you
(c
to obtain range information.

Notes
e
in
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Figure Decision variable ranges illustrated
If the three bold lines are viewed as separate objective contours, the sensitivity
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ranges for choice factors are shown. It is obvious that a range of values for the amount
of plain chips ([32.5, 57.5] kg) and a matching range for the amount of Mexican chips
([50.0, 70.0] kg) may provide the same objective value for contour (1). This trend is also
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seen in Contour (3), although the ranges are different. There is just one optimum option
for objective contour (2).
The bold lines Initially, they were viewed as restrictions that overlap at the best
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solution. The shadow prices in this scenario are not unique, and the phenomenon is
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referred to as degeneracy. To date, there is no constraint equivalent to line (2) in the
potato chip issue, but a new constraint may simply be introduced for demonstrative
reasons only. This restriction prevents the objective value from falling below its ideal
level. As a result, the contours may alternatively be read as follows:
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●● The frying constraint

●● the new constraint restricting the optimum value
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●● the packing constraint are the three constraints

Examine the shadow prices for the boundaries’ nominal values in a relatively small
area around their shadow prices. This makes it easier to understand that the shadow
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pricing can be solved in a variety of ways. If constraint (2) is bound and has a shadow
price of 1.0 $/min, then the shadow prices for constraints (1) and (3) must be zero.
Constraint (2) may be made non-binding by loosening it a modest bit. Constraints (1)
and (3) become binding with positive prices equal to the ideal values when its shadow
price falls to zero. This suggests that under all three restrictions, there is a range of
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shadow prices where the ideal objective value stays constant in this unique situation.
1. The shadow price range for the frying limitation is [0.0, 0.17]
)A
2. The shadow price range for the new restriction is [0.0, 1.0]
3. while the shadow price range for the packing constraint is [0.0, 0.33]
Consider the following problem:
Maximize
(c
3x − 5y + 4w


Notes
e
x+y+w≤6
x + 2y + 3w ≤ 8
in
x + 3y + 9w ≤ 12
with x, y, w ≥ 0.
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We solve using the simplex algorithm.
Initial table
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Basic z x y w s1 s2 s3 Solution
Max 1 -3 5 -4 0 0 0 0
s1 0 1 1 1 1 0 0 6
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s2 0 1 2 3 0 1 0 8
x2 0 1 3 9 0 0 1 12
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Optimal table
Max
x2
1
0
0
1
r 8.25
0.75
0
0
2.875
1.125
0
0
0.125
-0.125
18.75
5.25
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s2 0 0 0.5 0 -0.75 1 -0.25 0.5
w 0 0 0.25 1 -0.125 0 0.125 0.75
The optimal value is 18.75, which may be found at the location (5.25, 0, .75) (in
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xyw space).
What happens if the objective coefficients are changed by a little amount? Let’s
have a look at a somewhat different situation.
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(3 + d1)x + (−5 + d2)y + (4 + d3)w
subjected to the same restrictions The amounts by which the objective coefficients
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have changed are represented by d1, d2, and d3, which might be positive or negative.
If the optimum of this new problem is the same as the optimum of the original
problem, we solve it by starting with a slightly modified initial tableau (modified to reflect
the fact that the objective coefficients have changed), and then repeating the steps that
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the simplex algorithm used to get from the initial tableau to the final (optimal) table above.
New initial table

)A
Max 1 -3 - d1 5 - d2 -4 - d3 0 0 0 0
s1 0 1 1 1 1 0 0 6
s2 0 1 2 3 0 1 0 8
x2 0 1 3 9 0 0 1 12
(c

New final table

Notes
e
Max 1 0 8.25 + .75d1 − 0 2.875 + 1.125d1 0 .125 − .125d1 1 8 . 7 5 +
in
d2 + .25d3 − .125d3 + .125d3 5.25d1 +
.75d3
x 0 1 0.75 0 1.125 0 −.125 5.25
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s2 0 0 0.5 0 −.75 1 −.25 0.5
w 0 0 0.25 1 −.125 0 0.125 0.75
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Things to observe about this new table
1. The goal row is the only one that has altered.

2. In the new final table, variables that had a value of 0 in the previous optimum table
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still have a coefficient of 0.
3. Is this new final tableau the best possible? To double-check, make sure that all of
the coefficients in the objective row are positive. That is, if the following optimality
si
requirements hold concurrently, we are at an optimal tableau for the new problem:
8.25 + .75d1 − d2 + .25d3 ≥ 0
2.875 + 1.125d1 − .125d3 ≥ 0

r
ve
.125 − .125d1 + .125d3 ≥ 0
In this scenario, we infer that our goal function alterations have maintained us at
the same optimum location (5.25, 0,.75), and the new best objective value is 18.75 +
5.25d1 +.75d3.
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We can simply find out how much the coefficient of x in the goal may vary while
keeping the optimum unaltered using the preceding collection of simultaneous inequalities
if all other coefficients stay constant. In this situation, d2 = d3 = 0, and so on.
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8.25 + .75d1 ≥ 0
2.875 + 1.125d1 ≥ 0
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.125 − .125d1 ≥ 0
In other words,
−2.55 ≤ d1 ≤ 1.
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If the other coefficients are constant, the optimum will remain unaltered as long as d1
is in this range, that is, as long as the coefficient of x in the objective remains between.44
and 4. We can determine the possible ranges for d2 and d3 in the same way:
)A
−∞ ≤ d2 ≤ 8.25
(so the coefficient of y can vary between −∞ and 3.25) and
−1 ≤ d3 ≤ 23
(c
(so the coefficient of y can vary between 3 and 27.)

Everything in this discussion remains valid for minimization problems, except that
Notes
e
the signs in the optimality conditions all change to ≤.
4. Here’s a quick way to figure out the new values for the goal row from the previous
in
optimum tableau: Add a new row to the top of the old optimal tableau, and in each
column corresponding to a problem variable (except z), put the amount by which
the coefficient of that variable has been changed in the modified objective function
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(easier to do than to say: above x, above y, above w, and above s1, s2, and s3 put
0). Also, on the left of the previous optimum tableau, add a new column with 1 to the
left of z, and the amount by which the coefficient of each basic variable has been
altered in the updated objective function to the left of each basic variable (so, e.g.,
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next to x put d1.) Take the dot product of that variable’s column with the new column,
and subtract the entry above that variable in the new row to compute the new
coefficient in the final tableau objective row of that variable; and take the dot product
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of the solution column with the new column to compute the new solution entry in the
objective row. Again, it’s simpler to do than to say: consider the illustration below.
d1 d2 d3 0 0 0
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1 Max 1 0 8.25 0 2.875 0 0.125 18.75
d1 x 0 1 0.75 0 1.125 0 -0.125 5.25
0 s2 0 0 r 0.5 0 -0.75 1 -0.25 0.5
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d3 w 0 0 0.25 1 -0.13 0 0.125 0.75
we see that the new coefficient of x in the objective should be:

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(1, d1, 0, d3) · (0, 1, 0, 0) − d1 = 0,
the new coefficient of y should be
(1, d1, 0, d3) · (8.25, .75, .5, .25) − d2 = 8.25 + .75d1 − d2 + .25d3,
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the new coefficient of w should be (1, d1, 0, d3) · (0, 0, 0, 1) − d3 = 0,
the new coefficient of s1 should be (1, d1, 0, d3) · (2.875, 1.125, −.75, −.125) − 0 =
ity
2.875 + 1.125d1 − .125d3,
the new coefficient of s2 should be (1, d1, 0, d3) · (0, 0, 1, 0) − 0 = 0
the new coefficient of s3 should be (1, d1, 0, d3) · (.125, −.125, −.25, .125) − 0 =
.125 − .125d1 + .125d3
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and the new solution entry should be (1, d1, 0, d3) · (18.75, 5.25, .5, .75) = 18.75 +
5.25d1 + .75d3.
)A
Here’s a worked example: Suppose, subject to the same constraints, the objective
we have to maximize is
4x − y + 30z.
In this case, d1 = 1, d2 = 4 and d3 = 26. We check that the optimality conditions

(c
are satisfied:
8.25 + .75(1) − (4) + .25(26) = 11.5 ≥ 0

2.875 + 1.125(1) − .125(26) = .75 ≥ 0

Notes
e
.125 − .125(1) + .125(26) = 3.25 ≥ 0
The new linear programming problem has the same optimum as the previous one:
in
x = 5.25, y = 0, w =.75, and the new optimal objective value is 18.75 + 5.25(1) +.75(26)
= 43.5. (as result we could independently verify by TORA).
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In this case, there’s one thing to keep in mind: We’re raising the coefficient of w
by d3 = 26, which is beyond the possible range for d3 for the optimum to remain in
the same place. If we just altered the w coefficient, the optimum would shift to a new
location. We can no longer depend on the individual feasible range for d3 since we are
O
also modifying the coefficients of x and y.
3.1.2 Availability of Resources
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Shadow prices, reduced costs, and new activities
We see that the additional activity of making champagne glasses is not conducted
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in our new iteration of the custom-molder example. Could we have known this without
using the simplex technique to the full problem? It turns out that a correct understanding
of shadow pricing is necessary. In appealing from a financial standpoint Let us,
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however, take it a little more gently. Remember how the shadow price is defined a
constraint related with a specific constraint
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Definition. The change in the optimum value of the objective function per unit
increase in the righthand-side value for that constraint is the shadow price associated
with that constraint, with all other problem data staying constant.
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Is it therefore straightforward to deduce the shadow pricing from the final tableau?
In general, the answer is yes, but let us analyse our example for clarity.
Assume that the first constraint in our model is the manufacturing capacity.
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6x1 + 5x2 + 8x3 + x4 = 60
The time limit has been extended from 60 to 61 hours. We are effectively obtaining
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one more unit of manufacturing capacity for nothing. By permitting the slack variable
x4 to take on negative values, we can get the same conclusion algebraically. If x4 is
changed to x4 1 (from its ideal value of x4 = 0 to x4 = 1),
6x1 + 5x2 + 8x3 + x4 = 61,

m
That’s precisely what we wanted.
Because x4 is a slack variable, it does not exist in any other constraint or objective
function in the original model formulation. As a result, no other right-hand value in the
)A
original issue formulation is affected by this substitution. What contribution does this
extra unit of capacity make to the optimum profit? We may answer this question by
looking at the final tableau’s objective function, which is provided by:
(c
The simplex method’s optimality criteria suggest that the best solution is found
by setting the nonbasic variables x3 = x4 = x5 = 0, which yields a profit of . If we

are now permitted to manufacture x4 = 1, our profit improves by 11 14 hundred dollars

Notes
e
for each extra unit of capacity available. The marginal value, or shadow price, for
production hours is so.
in
Every constraint’s righthand side may be examined in this manner, such that
the shadow price for a given constraint is just the negative of the coefficient of the
corresponding slack (or fake) variable in the final tableau’s objective function. The
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shadow pricing for our case are 11 14 hundred dollars per hour of production capacity, 1
350 dollars per hundred cubic feet of storage capacity, and zero for the six-ounce juice-
glass demand constraint. It’s important to remember that the shadow prices are linked
to the problem’s restrictions, not the variables. They are, in reality, the marginal value of
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an extra unit of a certain right-side value.
So far, we’ve spoken about shadow pricing for the linear-programming model’s
explicit structural limitations. The nonnegativity restrictions also have a shadow price,
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which is referred to as decreased cost in linear programming terms.
The shadow price of each constraint (i.e., the corresponding change in the
objective function per unit rise in the lower limit of the variable) is the lowered cost
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associated with the nonnegativity constraint for each variable.
The lowered expenses may also be calculated directly from the final tableau’s goal
equation. The final objective form in our case is
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3.1.3 Input-Output Coefficients
Inter-industry exchange input-output analysis has shown to be effective in Life
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cycle assessment (LCA.)
In economics, the concept of input-output has a long history. Input-output affected

linear programming (LP) in its early stages, which is less well recognised. In fact, input-
U
output models may be thought of as variations on linear programming issues. When

confronted with complicated choice issues, linear programming is the most effective
practical technique for assisting us in making the greatest use of finite resources.
ity
Linear programming and other optimisation methods are often used by businesses to
organise their operations, such as supply chain logistics, production scheduling, and
resource allocation in general. The historical link between input output analysis and
linear programming is shown in this chapter. Following that, we prove that an input-
output model is a subset of an LP formulation. We demonstrate how an LP formulation,
m
in general, can deal with scenarios involving multifunctional units and different
technologies via several cases.
)A
Environmental decision support models

Various environmental analysis models have emerged throughout time. The value
of a model should not be determined by how closely it resembles reality, but rather
by its relevance to the choices to be made. When selecting the proper modelling
technique, one must consider the sort of choice to be made.
(c
●● At the national level, decision-making is aided by general equilibrium models for

the economy and industrial sectors. Optimisation is often used in these models
to discover equilibrium or optimum growth routes. Computable general equilibrium

Notes
e
(CGE) models for economies and IO models are two examples.
●● Industry sector: For significant sectors of the economy, detailed LP is used. Partial
in
equilibrium and linear programming models are the models under question. The
MARKAL (Market Allocation) model, for example, is the most extensively used
energy model for policy study.
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●● The business: Companies commonly utilise optimization models to organise their
actions on a regular basis. Supply chain logistics, transportation, and production
scheduling are all examples.
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●● LCA at the process level defines the steps required in delivering a certain product or
service. At a thorough process level, traditional LCA traces the energy and material
flows necessary for the manufacturing, use, and disposal of a product. Franklin
Associates, for example, performed the first LCA research for Coca-Cola in 1969 to
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identify which beverage containers had the lowest environmental discharges.
Process LCA, for example, may be utilised as input to both enterprises and
authorities in certain circumstances (for example, the beverage research), and
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optimisation models are also applied at the process level.
It’s critical that the model be applicable to the choices. An inputoutput model
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classifies technology into industries (or products into commodities).
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It’s ideal for analysing the environmental effect of how increased transportation
emissions affect emissions in other sectors through inter-industry exchanges. It
is, however, unable to discern between the environmental performance of various
technologies LCA is highly suited for thorough process LCA in the transportation industry.
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On the other hand, thorough process LCAs based on site-specific data are much too
precise to be used to effective national policymaking. Furthermore, omitting higher-order
upstream resource needs may save up to 50% of the time (Lenzen 2001). As seen by the
survey in the final part of this chapter, LCA is increasingly being combined with LP and
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other optimization methods. Furthermore, precise models of significant industrial sectors

(for example, energy) must be connected to economic models.
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The beginning of linear programming and its relationship with input-output

According to Albers et al. (1986), George B. Dantzig is recognised as the “Father
of Linear Programming.” Following WWII, he worked with the US Air Force on
mechanising their planning process. He had heard of Leontief’s inter-industry concept,
which he had learnt about in 1932.
m
Leontief’s input-output technique has the benefit of being mathematically simple,

which made it useful for planning. Calculations were done using mechanical desk
)A
calculators at the time. The input-output method depicted the economy as a network
of industries, each producing unique, non-substitutable items over a certain period of
time. The input-output technique may be applied to industrial sectors, enterprises, or
any other level of organisation in general.
The Leontief model, on the other hand, has to be generalised for Dantzig’s planning
(c
difficulties. To begin with, a business may generate its goods in a variety of methods.

A huge number of plausible options to provide the same product characterises the
Notes
e
planning challenge. The Leontief substitution model (Albers et al., 1986) was born as
a result of this. There was no systematic way of analysing all the possible methods of
providing the same outcome before the simplex technique (i.e. the search algorithm
in
that solves the LP issue) was invented, and planning was done in a heuristic, ruled-
based fashion (Dantzig, 1963) Second, real planning challenges were staged and
highly dynamic, necessitating the use of dynamic models rather than static models.
nl
Products may be stored from one period to the next, and demand may fluctuate over
longer periods. The original Leontief model was transformed into a dynamic Leontief
substitution model as a result of this (Dantzig, 1955)
O
Dantzig created the Simplex method, which has shown to be quite effective in
addressing linear programming problems. It was now feasible to identify optimum
solutions to planning issues in a systematic and efficient manner using this strategy.
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Input-output and linear programming problems
We begin by describing a basic two-industry economy as an input-output model,
si
as well as the assumptions that underpin it. After that, we’ll illustrate how to describe
the input-output model as an LP formulation. Finally, we’ll explain how LP solves issues
caused by the input-output model’s underlying assumptions, which often generate
problems in LCA evaluations.
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A Simple IO Model
Remember what an input-output economy is from the last lesson on environmental
decision support models. We’ll describe the assumptions of an IO table in mathematical
terms for clarity. A two-industry economy in which each generates precisely one item.
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Each product is unique and cannot be substituted.
The initial assumption, according to LCA lingo, is that there are no multifunctional
U
manufacturing processes. The paper and pulp business, for example, solely
produces paper. The latter assumption asserts that the product is produced by just
one technology or industry, such as paper, which can only be produced by the paper
industry and cannot be substituted by any other sector.
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Furthermore, each industry emits pollutants. The following is the related

mathematical definition:
Let’s call the set of commodities I =1, 2 the set of industries j =1, 2 the set of
industries, and the set of emissions k=1...3 the set of emissions.
m
xi represents the entire production of commodity I with x j 0 for every j. [GNOK/yr]
xij –goods i,industry j input need

)A
[GNOK/yr]
di – the ultimate desire for good I is in. [GNOK/yr]
ekj - type k emissions from industry j in physical units. [mass units per year]
(c
qk is the total amount of type k emissions.
[mass units per year]

x0 represents the overall output of labour services. [GNOK/yr]

Notes
e
x0j– labour service input demand for sector j [GNOK/yr]
w - hourly rate of pay for labour services [GNOK / GNOK / GNOK / GNOK / GNOK
in
/ GNOK / GNOK / GN
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r si
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The single main input element in the economy is labour services (x0j). At a wage
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rate of w, labour services are the sole expense to the economy.
This information will be used to re-interpret the IO model as an LP issue.

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Labor services are in high demand, yet there is no ultimate demand. Emissions are
comparable to major input components in that they have an external cost to the economy.
The input-output coefficients are calculated using the IO table:

ity
a x / x , kj kj j b e / x , j j j a x / x
Input-output coefficients in parentheses. A collection of equations may be used.

m
)A
Advances in Modeling and Theory
In matrix notation:
Ax + d = x
(c
Bx = q
A0x = x

x I A d 1 () produces x1 1337 [GNOK/yr] of industrial production and x2 74.7

Notes
e
[GNOK/yr] of paper output. The environmental stress is q B x, with q1 being 50 Mt CO2,
q2 being 327 kt CH4, and q3 being 970 kg Cd. Equation (36.7) must hold, or there
must be more labour available than necessary, to ensure that there is adequate labour
in
available. To double-check, we see that an x0 = 0.705,0.554 1337,41 984 is equal to 0.
IO Model as a Special Case of an LP model
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In the preceding section, the IO model represented the simplest Leontief system
with a unique solution. In fact, input-output analysis impacted linear programming
(Dorfman et al., 1958, pp210-215), and the IO model may be seen as a specific
O
example of a linear programme (Dorfman et al., 1958, pp210-215) (Dantzig, 1963
pp16-20; Alberts et al., 1976). A conventional LP formulation includes a linear objective
function to optimise over, as well as a collection of nonnegative choice variables and a
set of linear constraints.
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si
We consider both equality and inequality restrictions when we talk about
constraints (i.e., ). The issue is addressed using the Simplex search technique to
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identify the set of variables x that optimise z under restrictions. Starting with our
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previous section’s IO model,
(I – A)x = d
Denoting ( ) ~ A I A , we get
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Ax = d
The left side of the equation specifies that net commodity production must match
demand. We might loosen this assumption and specify that net commodity output must
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be larger than or equal to demand:
~Ax = d
The input-output model is a simplified version of a Walrasian general equilibrium

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economic model. There are no free commodities in a functioning economy. The

principal input element Labor is the single cost of production in our IO model. The unit
cost of production for product j is: If we define wj as the wage rate of industry j, the unit
cost of production for product j is:
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waxjjj
Hence the minimum cost at which the society satisfies final demand can be stated as:
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Emissions q are externalities in this case (i.e., the cost of emissions is not
absorbed in the economy) and have no bearing on achieving equilibrium. As a result, it
isn’t mentioned in the minimization issue.
Bx = q
Notes
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To indicate the overall cost of the economy, we may add the total output column xj
across the items I or we can replace with to minimise output rather than costs:
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Advances in Modeling and Theory
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Graphical solution to the LP problem. The shaded region represents infeasible solutions,
while the upper right region is feasible, but will provide goods in excess of demand.
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Only relative prices can be calculated using the Leontief model. For the sake of
simplicity, we give the wage rate w= 1 [monetary units] to both industries.
The LP problem’s answer is x1=1337 and x2=74.7 GNOK/yr. The result of

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our optimization issue is the same as that obtained from the basic IO model in the
preceding section. The graphical solution to the minimisation issue is shown by
emissions q, which derives from equation. Lower limits for the solution are provided by
the two equations that describe demand for each product (x1,x2). The objective function
whose optimum is at the intersection of the isocurve 984 * z and the two demand
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constraints is shown by the cost isocurves.
The LP formulation’s cost minimisation plus demand restrictions equation is equal

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to the IO model’s greater demand balance assumption from the preceding section. As a
result, we’ve shown that the LP formulation is an extended version of the IO model.
Matrix inversion is, of course, a far easier way to solve the IO model. This
example just helps to demonstrate that an IO model is a particular instance of a linear
programming issue with completely coherent underlying assumptions.
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(Dorfman and colleagues, 1958).

Problems with multifunctional outputs

Notes
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When a business or process creates many products, the question of how much
environmental impact should be assigned to each process arises. For example, if we
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wish to calculate emissions from one tonne of paper generated, we need consider
that the paper business produces heat as a by-product, which may be used to replace
other heat sources (oil, for instance). The issue then becomes: how can we account
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for emissions associated with paper production? The issue is known as the allocation
problem, and LCA devotes a lot of time and effort on it.
The topic is mathematically treated in Heijungs and Frischknecht (1998) and
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Heijungs and Suh (2002). Matrixes with more rows than columns are generated by
systems having many products mathematically. As a result, matrix inversion is impossible.
Chemical pulping produces a lot of waste heat, which may be utilised for district
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heating or other things.
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The equations are now modified into:

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The industry buys 0.008 monetary units of heat for each unit production, according
to the final row. The heat demand of the paper and pulp sector is 0.028 per (monetary)
unit produced, whereas the ultimate demand is 0. The paper industry’s heat services
are limited to 19 percent of total paper production, introducing a third restraint. The
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remainder of the issue is the same as it was in the preceding section:

Notes
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The solution to this problem is an output of 1 x =1325 GNOK industrial goods
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and 2 x =72.1 tonne of paper at a total cost of z 971 GNOK/yr. The corresponding
environmental stress is q Bx , which yields 1 q =50 Mt CO2, q2 =326 kt CH4 and 3 q
=969 kg Cd.
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Input-Output Analysis and Linear Programming
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Graphical solution multifunctional system
3.2 Addition of an Additional Variable and Constraint

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Intoduction
A linear program’s variables are quite similar to its numerical parameters. Both of these
symbols represent numbers and may be used in arithmetic expressions. The modeller
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provides parameter values or computes them from other values, whilst the values of
variables are decided by an optimal algorithm (written in one of the solver packages).
Variable declarations are similar to parameter declarations in terms of syntax,

except they start with the keyword var rather than param. When qualifying terms
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are applied to variables rather than parameters, the meaning of the phrases in the
declaration may be changed.

In variable declarations for linear programmes, phrases starting with >= or = are by
Notes
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far the most popular.
Adding a new activity xn+1, and adding cn+1 and An+1
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In many instances, new chances present themselves, and we want to test whether
taking advantage of these new opportunities can improve our condition. Assume the
initial LP is to maximise Z = cT x, with Ax b and x 0 as parameters. Consider this LP to
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be a manufacturing issue, with a new product (n + 1) to be added. This new product’s
quantity will be xn+1, and its profit will be cn+1. An+1 is the number of resources
needed to make a unit product (n + 1). As a result, the new album is,
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Maximize ZØ = cT x+cn+1xn+1 such that Ax+An+1xn+1 ≤ b, x = (x1, x2, ··· , xn) T
≥ 0, xn+1 ≥ 0.
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3.2.1 Addition of an Additional Variable
It’s easy to see that adding a new activity is as simple as adding a new column in
the simplex tableau (in this example, xn+1) corresponding to the new activity. For all of
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the rows, the RHS will stay the same. The present collection of basic variables is still
optimum as long as the coefficient in Row (0) for the new variable is non-negative.
The present collection of basic variables is no longer optimum if the coefficient in

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Row (0) for the new variable turns negative. Use the simplex technique to create a new
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optimum solution, beginning with the newly acquired tableau.
Examples:
Maximize Z = −x1 + x2
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such that 2x1 + x2 ≤ 4
x1 + x2 ≤ 2
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x1, x2 ≥ 0.
The optimal tableau for this LP is
Basic Variable Row Z x1 x2 s1 s2 RHS Ratios

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Z 0 1 2 0 0 1 2
s1 1 0 1 0 1 -1 2
x2 2 0 1 1 0 1 2

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We want to add a new variable x3 and

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In other words, the LP now becomes
Maximize Z = −x1 + x2 + x3
such that 2x1 + x2 + x3 ≤ 4

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x1 + x2 − x3 ≤ 2
x1, x2, x3 ≥ 0

Will the current set of basic variables xB = [s1, x2] remain optimal? If not, find the
Notes
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optimal solution.
Solution
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Therefore, xB is no longer optimal.
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we have the simplex table
Basic Variable Row Z x1 x2 x3 s1 s2 RHS Ratios

Z 0 1 2 0 -2 0 1 2
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s1 1 0 1 0 2 1 -1 2 2/2 = 1
x2 2 0 1 1 -1 0 1 2
Basic Variable Row Z x1 x2 rx3 s1 s2 RHS Ratios

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Z 0 1 3 0 0 1 0 4
x3 1 0 0.5 0 1 0.5 -0.5 1
x2 2 0 1.5 1 0 0.5 0.5 3

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Therefore, the new optimal solution is Z∗ = 4 with (x∗ 1, x∗ 2, x∗ 3) = (0, 3, 1), (s∗ 1,
s∗ 2) = (0, 0).
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Adding a variable
Now imagine adding a new variable to an LP, xm+n+1. Of course, the new variable
should include coefficients: we’ll need a cm+n+1 for the objective functions and a new
column Am+n+1 for the matrix of constraint coefficients.
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We’ll make the assumption that the new variable should be included to the final
dictionary as a non-basic variable, based on the initial dictionary (where we treat slack
variables as basic and non-slack variables as non-basic). We obtain this dictionary for the
LP with the additional variable using the matrix formulae to calculate the new column:
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Because the first column hasn’t changed, this dictionary is possible, but the new
coefficient in the z-row may have any sign. cm+n+1 c1 B Am+n+1 0 and this dictionary
is already optimum if we’re fortunate! If not, we may just use it as the starting dictionary
for the Simplex Method since it is at least viable.
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Other types of changes

Notes
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You’ll notice that although we can easily establish a criteria for when the amended
vocabulary is optimum, we won’t be left with a viable dictionary if you do this kind of
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analysis for a modification of b or adding a constraint (guessing the new slack variable
is simple). Instead, we’d obtain a dictionary that isn’t practicable but “appears optimal”:
the z-coefficients row’s are all negative.
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The Simplex Method cannot employ such a dictionary since it pivots from feasible
dictionary to feasible dictionary in search of non-positive coefficients in the z-row.
Instead of using the Simplex Method, we’ll utilise a very similar pivoting approach
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called the Dual Simplex Method to take advantage of an infeasible dictionary that
“looks optimum.”
3.2.2 Addition of anConstraint
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Consider instead adding a new constraint to the equation (P). The new constraint will
need the introduction of a new slack variable, such as xm+n+1. We must either add this
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new variable as a basic or non-basic to the final dictionary. We’ll suppose that this new
slack variable will be simple since we took inspiration from how to create an initial dictionary.
We can readily describe the new slack variable in terms of the original (i.e., non-
slack) variable of (P); for example, if the new constraint is am+1,1x1 + am+1,2x2 + +
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am+1,nxn bm+1, the new slack variable is simply xm+n+1 = bm+1 am+1,1x1 am+1,2x2
am+1,nxn bm+1 However, we’ll need a formula in terms of the fundamental variables to
add a row to the dictionary for xm+n+1. That’s simple and familiar: it’s the same stage in
the 2-phase Simplex Method where we need to construct a formula for the goal function
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in terms of the current basis variables once phase 1 is completed. We do the same
thing here: in the xm+n+1 formula above, we put in whatever the dictionary says for
each basic variable that occurs to get a formula that only uses non-basics.
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When compared to the final dictionary for P, the resultant dictionary for (P) just
includes one additional row; in particular, it has the same z-row, hence it is inherently
dual feasible. It’s also “largely feasible”: all of the fundamental variables, with the
exception of the new one, xm+n+1, have the same values as previously, making them
all non-negative.
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If the new row’s resultant value for xm+n+1 is non-negative, the new dictionary is
optimum. If not, it’s dual viable, and the Dual Simplex Method can handle the rest.

3.2.3 Relationship to the Dual

Notes
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Duality
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Every linear programming issue (the primal) has a dual, which is another linear
programming problem. If the primal has n variables and m constraints, the dual has n
variables and m constraints. The answer to each problem is sufficient for determining
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the answer to the other. In reality, because the dual of a dual is the primordial, it makes
no difference which is chosen as the primal.
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Suppose that the primal problem is:
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If the above is the primal LP problem, the dual problem is:

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Notes
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The Yi variables are referred to as “dual variables.” Each constraint in the
fundamental issue will be paired with one dual variable. Note that equality restrictions
are either replaced by two inequalities or the related dual variable is unlimited in sign if
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left as an equality.
An example of the primal-dual relationship

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Consider the following primal problem and its corresponding dual
Primal Problem:
Min Zx = 10 X1 + 4 X2
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Dual Variables
s.t.: X1 ≥ 4 Y1
X2 ≥ 6 Y2
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X1 + 2 X2 ≥ 20 Y3
2 X1 + X2 ≥ 17 Y4
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Dual Problem:
Max Zy = 4 Y1 + 6 Y2 + 20 Y3 + 17 Y4
s.t.: Y1 + Y3 + 2 Y4 ≤ 10
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Y2 + 2 Y3 + Y4 ≤ 4
The solutions for these two linear optimization problems are:

Primal Dual Dual

Notes
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X1 = 4 Y1 = 2
X2 = 9 Y2 = 0
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S1 = 0 Y3 = 0
S2 = 3 Y4 = 4
S3 = 2 S1 = 0
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S4 = 0 S2 = 0
Z = 76 ˜ Z = 76
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The dual is easier to solve using the simplex technique since there is a
fundamental viable solution that does not need the inclusion of fake variables, and there
are only two constraints instead of four.
For both instances of the example issue, the optimum value of the non-zero
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sections of the objective functions is:
Zy = 4 (2) + 17 (4) = 76 (dual)
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And
Zx = 10 (4) + 4 (9) = 76 (primal)
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On the two LINGO solutions in Table 5.1, a more thorough presentation of
information offered by solutions to both variants of the example issue is presented. It’s
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worth noting that the primal solution’s dual prices are the inverses of the dual solution
decision variables’ values, whereas the dual solution’s dual prices are the same as the
primal solution’s decision variables’ values.
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The Dual Theorem can be stated as: Let:

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And
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Case Study
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Introduction and background

How sensitive is your analysis? A case study on addressing it at ADaM level.
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Introduction
Sponsors of randomised blinded clinical trials are obliged, as part of the Statistical
Analysis Plan (SAP) and protocol, to identify the analyses and designate one as the
principal analysis long before they have access to the outcome data. This analysis pre-
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planning eliminates the possibility of bias. aids in the resolution of conflicts between
sponsors and the Food and Drug Administration (FDA).

Interpretation of the findings The assumptions established by these pre-specified

Notes
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assessments, on the other hand, at best employ the statistical information derived from
similar trials that is unverifiable at the start of the trial; and there is statistical information
derived from similar trials that is unverifiable at the start of the trial; and there is
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statistical information derived from.
It’s possible that following the unblinding procedure, it’ll be shown to be
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unsupported by real data.
Sensitivity analysis (SA) aids in the resolution of the aforementioned problem by

determining if the findings of Important analyses are sensitive or resilient enough to
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deal with assumptions breaches.
Performing studies that focus on a single clinical topic under different assumptions.
In a nutshell, SA answers the question “what if the essential inputs or assumptions
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are changed?” Consistency The relationship between main and sensitivity analysis
findings may therefore be strengthened. the results’ credibility The Food and Drug
Administration (FDA) and the European Medicines Association (EMEA), which provide
advise on.
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“It is crucial to analyse the robustness of the findings,” according to Statistical
Principles for Clinical Trials.... the trial’s main findings.” The term “robustness” refers to
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“the sensitivity of the overall results to changes in the data.”
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Data restrictions, assumptions, and analytic techniques to data analysis” (CDER &
CBER, 2007).
Some “What if” scenarios used in sensitivity analysis include substituting

anticipated data for actual data.
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One of the most often used approaches to missing data is Last Observation
Carried Forward (LOCF).
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Consider a data point from an earlier time period if the data for the time period of
interest is missing point. It might be difficult to include future data while adhering to FDA
traceability requirements.
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The Clinical Data Interchange Standards Consortium (CDISC) Study was used to
drive study data standards.
CDISC Analysis Data Model (CDISC ADM) and Data Tabulation Model (SDTM)
(ADaM). The goal of this study is to: present an overview of several sensitivity analyses
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used in clinical trials, with a case study to demonstrate how to conduct sensitivity analyses
with missing data in particular, while complying to the SDTM and other guidelines.
Implementation recommendations for ADaM.

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Types of sensistivity analysis

In this part, we discuss circumstances that may need sensitivity studies, as well as
how sensitivity analyses may be used to assess the robustness of randomised clinical
trial data. This is not a complete list, but it demonstrates some typical cases in which
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sensitivity studies may be beneficial (Thabane, et al., 2013) (Morris, Kahan, & White,
2014); likewise, some sensitivity scenarios.

Outliers:
Notes
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Outliers are quantitatively dissimilar to the rest of the data and are often rare
occurrences in a sample.
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Outliers have the potential to significantly alter the mean, hence affecting any
calculation of intervention impact based on the mean. A box plot would validate the
outliers visually, and a sensitivity analysis with and without the outliers would determine
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the influence of the outliers on the main conclusion.
Protocol deviations:
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Some participants in clinical trials may not adhere to the pre-determined treatment
regimen or miss some of the planned therapy appointments. Switching between the
intervention and control arms, as well as non-implementation of the intervention as
recommended (e.g., dosage delays or reductions), are examples of protocol deviations.
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In most randomised clinical trials, the main analysis follows the intention-to-treat
(ITT) principle, which means that participants are assessed according to whatever arm
they were originally assigned to, regardless of whether they received or finished the
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therapy. The influence of procedure changes on outcomes is assessed using two kinds
of sensitivity analyses:
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1. Per-protocol (PP) analysis: individuals who do not follow the procedure are not
included in the study.
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2. As-treated (AT) analysis: this method analyses individuals based on the therapy they
really got.
In conclusion, the ITT analysis depicts the “real world” situation in which some
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participants do not comply, while the PP analysis depicts the ideal scenario in which all
participants comply and is more likely to reveal an impact.
Clustering:
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Sponsors may recruit volunteers from several venues or countries for the same
experiment. A cluster will be formed by each of these centres. Patients treated by the
same physician, doctors at the same hospital, and so on might form clusters. When
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compared to patients from various clusters, patients within a cluster frequently show
some degree of uniformity. As a result, in order to account for similarities within clusters,
the following two types of sensitivity assessments might be included in the analytic plans:
1. Analysis with and without clustering: contrasting an analysis that ignores clustering
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(i.e., assumes that the data are independent) to one in which clustering is taken into
consideration as the major technique of analysis.
2. A comparison of several strategies for accounting for clustering.
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Missing data:
Almost every research study contains some data that is missing. Non-response in
surveys owing to lack of interest, lack of time, illogical replies, and coding mistakes in
data entry/transfer are the most common reasons for missing data.
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●● As a result of failure to follow up, dropouts, non-compliance with protocol, missing

doses, and data entry problems.

Missing data is divided into two categories: Missing Completely At Random

Notes
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(MCAR) and Missing Not At Random (MNAR) (MNAR). Consider the following
hypothetical study, in which a new cancer therapy is compared to the standard of care,
and participants are tracked for two, four, six, and eight months. This missing data is
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MCAR if the participant misses the follow-up at the 6th and 8th months and they are
unrelated to the outcome of interest, which in this instance is death. The causes for
this, such as a clinical staff member being on leave or equipment malfunction, are often
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unrelated to the desired objective. However, if the participant missed the 6th month
visit because he was too unwell to attend to the facility, or the 8th month appointment
because he died, the programme would be terminated. The missing data is then MNAR
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and linked to the desired output. In an MNAR situation, ignoring missing data would
almost likely result in biassed parameter estimations.
Because it is sometimes difficult to determine the cause of missing data, any
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missing data might have an impact on the study results’ dependability. When dealing
with missing data, there are two primary approaches:
1. Ignore missing data and do a full case analysis.
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2. Use single or composite imputation methods to fill in the gaps in the missing data.
Imputation is one of the most prevalent methods for dealing with missing data.
Mean imputation, regression approach, last observation carried forward (LOCF),
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and worst observation carried forward (WOCF) are examples of single imputation
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techniques; and composite methods, which employ a mix of the aforementioned
methods to impute missing data. There are additional statistical methods for dealing
with missing data that do not need imputation. In studies with continuous outcomes,
for example, linear mixed models are used to analyse outcomes that are assessed
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frequently throughout time. For categorical answers, generalised estimating equations

[GEE] and random-effects generalised linear mixed models [GLMM] are often utilised.
It’s worth noting that the data in these models is considered to be missing at random.
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Scenario Sensitivity
Sensitivity Analysis Options
Analysis Options
Outliers • Assess outliers by a boxplot
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• Perform analyses with and without outliers

Protocol Deviations Perform
• Intention-to-treat analysis (as primary analysis)
• As-treated analysis
• Per-protocol analysis
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Clustering • Compare the analysis that ignores clustering with one

primary method and multi-center trials chosen to account
for clustering
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• Compare the analysis that ignores clustering with several

methods of accounting for clustering
Missing Data • Analyze only complete cases
• Impute the missing data using single or composite
imputation methods and redo the analysis
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Incorporating sensitivity analysis in adam data sets

Notes
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Data is often gathered as part of a clinical experiment and stored in a clinical
database. This data must be translated into standard data tables for analysis
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and submission, as required by the FDA’s research data requirements. Individual
observations from a clinical trial are gathered in accordance with the SDTM. The
essential notion is that based on related information (e.g., patient ID, date, time, study,
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study visit, technique, measurement unit, etc.), each piece of data may be individually
identifiable. As a result, each row comprises one piece of data and numerous columns
of identifying information, ensuring that the data is complete and consistent among
research. Demographics (DM), subject visits (SV), concomitant drugs (CM), exposure
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(EX), adverse events (AE), ECG findings (EG), laboratory results (LB), and vital signs
(V) are only a few of the “domains” in SDTM (VS).
The purpose of analysis data sets is to allow for statistical and scientific
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examination of research outcomes. The analysis data model (ADaM) lays out the key
concepts and criteria that must be followed to enable traceability from data collection
through analysis. “Authoritative source for all data derivations utilised in statistical
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analysis,” according to the ADaM data sets. If the key effectiveness variable was
change in body weight from baseline, the SDTM would include each body weight
measurement. The calculated change from baseline body weight for each time point to
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be included in the statistical analysis would be included in an ADaM data set.
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Questions for case study
1. Write a magazine type article on sensitivity analysis and its types
2. What are Adams data sets?
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3. Highlight the importance of data sets

4. What suggestions would you like to give to Adam
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Summary
●● In operations research, sensitivity analysis enables us to comprehend the impacts
that occur in an ideal solution. This entry describes what it is and how to use it.
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●● Revised model: The changes in the parameters to be studied are set in this
section. These will be used to determine the feasibility of the best option as well as
the consequences it has
●● Optimization: If the solution fails any of the tests, it will be optimised depending
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on the findings. As a result, it will be fine-tuned until the optimal values, those that
provide sufficient variables in important parameters, are discovered
●● When the goal function is changed, there are two scenarios to consider. The
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first scenario involves a modification in a non-basic variable (a variable that in

the solution takes on the value zero). The important non-basic variables in this
example are x1 and x3
●● If the coefficient of a fundamental variable increases, your value increases as
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well, and you still want to utilise the variable; but, if it increases enough, you may
wish to alter x such that x2 is conceivable. In many circumstances, this may be
accomplished by establishing a new foundation (and therefore another solution).

●● If the optimum of this new problem is the same as the optimum of the original
Notes
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problem, we solve it by starting with a slightly modified initial tableau (modified to
reflect the fact that the objective coefficients have changed), and then repeating
the steps that the simplex algorithm used to get from the initial tableau to the final
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(optimal) table above
●● In economics, the concept of input-output has a long history. Input-output affected
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linear programming (LP) in its early stages, which is less well recognised. In
fact, input-output models may be thought of as variations on linear programming
issues. When confronted with complicated choice issues, linear programming is
the most effective practical technique for assisting us in making the greatest use
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of finite resources. Linear programming and other optimisation methods are often
used by businesses to organise their operations, such as supply chain logistics,
production scheduling, and resource allocation in general.
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●● At the national level, decision-making is aided by general equilibrium models for
the economy and industrial sectors. Optimisation is often used in these models
to discover equilibrium or optimum growth routes. Computable general equilibrium
(CGE) models for economies and IO models are two examples
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●● LCA at the process level defines the steps required in delivering a certain product or
service. At a thorough process level, traditional LCA traces the energy and material
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flows necessary for the manufacturing, use, and disposal of a product. Franklin
Associates, for example, performed the first LCA research for Coca-Cola in 1969 to
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identify which beverage containers had the lowest environmental discharges
●● According to Albers et al. (1986), George B. Dantzig is recognised as the “Father
of Linear Programming.” Following WWII, he worked with the US Air Force on
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mechanising their planning process. He had heard of Leontief’s inter-industry

concept, which he had learnt about in 1932
●● The Leontief model, on the other hand, has to be generalised for Dantzig’s planning
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difficulties. To begin with, a business may generate its goods in a variety of methods
●● Dantzig created the Simplex method, which has shown to be quite effective in
addressing linear programming problems. It was now feasible to identify optimum
solutions to planning issues in a systematic and efficient manner using this strategy
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●● In the preceding section, the IO model represented the simplest Leontief system
with a unique solution. In fact, input-output analysis impacted linear programming
(Dorfman et al., 1958, pp210-215), and the IO model may be seen as a specific
example of a linear programme (Dorfman et al., 1958, pp210-215) (Dantzig, 1963
m
pp16-20; Alberts et al., 1976)

●● In many instances, new chances present themselves, and we want to test whether
taking advantage of these new opportunities can improve our condition. Assume
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the initial LP is to maximise Z = cT x, with Ax b and x 0 as parameters. Consider

this LP to be a manufacturing issue, with a new product (n + 1) to be added
●● The Simplex Method cannot employ such a dictionary since it pivots from feasible
dictionary to feasible dictionary in search of non-positive coefficients in the z-row.
(c
Instead of using the Simplex Method, we’ll utilise a very similar pivoting approach
called the Dual Simplex Method to take advantage of an infeasible dictionary that
“looks optimum.”
Glossary
Notes
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●● Sensitivity Analysis: Sensitivity analysis is a financial model that determines
how target variables are affected based on changes in other variables known as
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input variables.
●● Objective Function: It is defined as the objective of making decisions. In the
above example, the company wishes to increase the total profit represented by Z.
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So, profit is my objective function.
●● Input-Output Coefficients: It is defined as the objective of making decisions. In
the above example, the company wishes to increase the total profit represented by
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Z. So, profit is my objective function.
●● IO Model: An Input-Output model represents the flow of money in an economy,
primarily through the connection between industries; it shows the extent to which
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different industries are buying from and selling to one another in a particular
geographic region.
●● Variable: A variable is a quantity that may change within the context of a
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mathematical problem or experiment
●● Constraint: something that imposes a limit or restriction or that prevents
something from occurring. An example of a constraint is the fact that there are only
so many hours in a day to accomplish things r
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●● Dual Simplex Method: The Dual Simplex Method will pivot from dual feasible
dictionary to dual feasible dictionary working towards feasibility. This new pivoting
strategy is called the Dual Simplex Method because it really is the same as
performing the usual Simplex Method on the dual linear problem.
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●● Duality: The term ‘dual’, in general, implies two or double. The concept of duality
is very useful in mathematics, physics, statistics, engineering, and managerial
decision-making.
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Check Your Understanding

1. Which of the following statements is true?
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a) Changing the RHS of a constraint changes its slope.

b) Increasing the RHS of a less than or equal to constraint will eventually make it
redundant.
c) A less than or equal to constraint with positive slack in the optimal solution will
m
always have an infinite allowable decrease for the RHS.

d) An optimal solution will never use up all of the resources available.
)A
2. The report which shows the final values of the decision variables, the objective function,
and the formula, slack or surplus, status, and LHS value for each constraint is the:
a) sensitivity report.
b) answer report.
(c
c) limits report.
d) constraint report.

3. Let x = number of units of product 1 to produce and let y = number of units of

Notes
e
product 2 to produce. Consider the following objective function: Maximize z = x + 2y.
Subject to the following constraints: x + y ≤ 12 (resource A), x ≤ 8 (resource B), y ≤ 6
(resource C), x and y ≥ 0. What will the optimal objective function value be?
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a) 12
b) 10
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c) 16
d) 18
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4. Consider a scenario with an objective function Minimize $14X + $17Y. Assume that
the value of X in the optimal solution is zero and the reduced cost for variable X is $3.
At what objective function coefficient will X first become part of the optimal solution?
a) 17
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b) 20
c) 11
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d) 14
5. Which of the following statements is true?
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a) Changes to an objective function coefficient will not affect the size of the
feasible region.
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b) If a constraint is nonbinding then its LHS is greater than its RHS.
c) Shadow prices can be found in the Answer Report.
d) An equality constraint is always nonbinding.
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6. Suppose that a MAX problem contained the following constraint: 5x + 8y ≤ 40. Then
which of the following statements is true?
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a) For the point (4, 2), the slack for this constraint would be zero.
b) For the point (8, 5), the slack for this constraint would have a value of 40.
c) For the point (1, 4), the slack for this constraint would have a value of 3.
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d) For the point (4, 2.5), the slack for this constraint would be a positive value.
7. If a greater than or equal to constraint is used to model a minimum requirement
constraint, then:
m
a) it will always be a binding constraint if the objective function is a MIN.

b) it will be a binding constraint if the minimum requirement is exactly met.
c) it will always be a binding constraint if the objective function is a MAX.
)A
d) it will be a binding constraint if the minimum requirement is exceeded.

8. When there is a change in one of the coefficients of the objective function and yet
optimal point remains as the optimal point after the change then
a) the value of the new optimal objective function remains the same as original
(c

b) the value of the new optimal objective function changes and is generally
Notes
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different to the original
9. Any change in the values for the RHS (Right Hand Side) of a binding constraint of an
in
LP problem will:
a) change the slope of the objective function
b) not change the slope of the constraint but move it parallel to the original
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c) not change the feasibility region
d) change the slope of the that constraint
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10. Sensitivity Analysis generally assumes:
a) we are considering a change in only one input data value at a time.
b) we are considering several change in several input data values at a time
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c) we are considering a change in two input data values at a time.
11. The case where there are alternate solutions or multiple optimal solutions is mostly
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identified in solver when:
a) when the Allowable Increase or Allowable Decrease column for the RHS of a
variable has a value of zero in the Constraints Table.
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b) when the Allowable Increase or Allowable Decrease column for the OFC of a
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variable has a value of zero in the Adjustable Cells Table.
c) shadow prices are all non-zero
d) shadow prices are zero
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12. Improving a minimization LP problem means:

a) decreasing the optimal objective function value
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b) increasing the optimal objective function value
Exercise
1. What do you mean by Sensitivity analysis?
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2. What is the change in objective functions?

3. What do you mean by availability of resources?
4. What is Input-Output coefficients?
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5. What do you mean by addition of an additional variable?

6. What do you mean by addition of a constraint?
)A
7. What is relationship to the dual?
Activities
1. With the help of Sensitivity analysis find the objective function of Marketing strategies
adopted in Dell Ltd.
(c
2. Analyse a company’s sensitivity analysis with respect to adding a new constraint.

Check Your Understanding – Answers

Notes
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1. b) Increasing the RHS of a less than or equal to constraint will eventually
make it redundant.
in
2. b) answer report.
3. d) 18
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4. c) 11
5. a) Changes to an objective function coefficient will not affect the size of the
feasible region
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6. c) For the point (1, 4), the slack for this constraint would have a value of 3.
7. c) it will always be a binding constraint if the objective function is a MAX.
8. b) the value of the new optimal objective function changes and is generally
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different to the original
9. b) not change the slope of the constraint but move it parallel to the original
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10. a) we are considering a change in only one input data value at a time.
11. b) when the Allowable Increase or Allowable Decrease column for the OFC of
a variable has a value of zero in the Adjustable Cells Table.
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12. a) decreasing the optimal objective function value
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)A
(c

Module - IV: Transportation Model

Notes
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●● Introduction to Transportation Problem
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●● Feasible Solution Methods: Northwest Method
●● Feasible Solution Methods: Lowest Cost Method
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●● Feasible Solution Methods: Vogel’s Method
●● Optimal Solution: Modified Distribution (MODI) Method
●● Unbalanced Transportation Problem
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●● Unbalanced Transportation Problem and Its Solution
●● Degeneracy
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●● Degeneracy Resolution
●● Multiple Optimal Solutions
●● Maximization Transportation Problem
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ve
Introduction
Models of transportation may be divided into four categories: microscopic,
mesoscopic, macroscopic, and metascopic. Individual aspects of transportation
systems, such as individual vehicle dynamics and individual passenger behaviour,
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are studied using microscopic models. Mesoscopic models look at transportation

components in tiny groupings and believe them to be homogenous. Vehicle platoon
dynamics and household-level travel behaviour are two examples. Aggregated traffic
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flow dynamics and zonal-level travel demand analysis are examples of macro models
that deal with aggregated features of transportation aspects.
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m
)A
(c
Traffic flow, travel behaviour, transportation networks, traffic control and

management, freight systems, and other forms of transportation are all major study
topics in transportation engineering. The study of traffic flow encompasses micro-,

meso-, and macro-scale aspects, as well as human elements and autonomous

Notes
e
vehicles. Empirical investigations, as well as statistical and computer science modelling,
are common methodologies prompted by new data collecting technology. Theories
and models created for analogous physical things, such as fluids and particles, are
in
sometimes applied to traffic flow characteristics and enhanced. Demand analysis,
route selection, day-to-day dynamics, and activity selection are all study areas in
travel behaviour. Survey-based approaches and travel decision models derived from
nl
economics and logistics are common research methods. Design and administration
of traffic control devices, traveller information providing, and, more recently, vehicular
communication systems are all part of traffic control and management. Optimisation
O
and control techniques are often used. Traffic flow, passenger behaviour, and traffic
regulation are all part of the transportation network. Its design and performance
assessment are often based on integrated planning and operations models.
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4.1 Mathematical Model of Transportation Problem;
Feasible Solution Methods: Northwest Method,
Lowest Cost Method and Vogel’s Method
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Introduction
The Transportation Model is a specific example of the LPP (Linear Programming
r
Problem), in which the primary goal is to move a product from multiple origins to
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numerous destinations at the lowest possible cost overall.
Transport Models are characterised by the knowledge of the sources and destinations,
as well as the knowledge of the supply and demand at each source and destination.
ni
Its goal is to discover the most cost-effective transportation arrangement possible

while keeping transportation costs to a bare minimum.
The transportation model is concerned with the notion of transporting something

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from one location to another without causing it to change. Based on the assumption
that any damage sustained while travelling has negative repercussions, it is used to
examine transportation networks and determine the most effective path for resource
allocation. The transportation problem is a special type of Linear Programming Problem
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(LPP) in which goods are transported from a set of sources to a set of destinations
while taking into consideration the supply and demand of the sources and destinations,
respectively, in order to reduce the total cost of transportation as much as possible. It is
also referred to as the Hitchcock issue in some circles.
m
It is a method of finding the most cost-effective way to distribute a product from a

number of factories or warehouses to a number of locations in order to save transportation
costs while still fulfilling consumer needs. Linear programming is used in the transportation
)A
model to analyse physical distribution management problems of this nature.
The transportation problem is solved in such a way that the cost function is
minimised. The cost function in this context refers to the amount of money spent by
the logistics provider to carry the commodities from the point of production or supply
(c
to the point of consumption. The cost of transportation is determined by a variety of

factors. It comprises information such as the distance between the two places, the route

used, the mode of transportation, the number of units transferred, the pace at which
Notes
e
the units are moved, and so on. It is therefore imperative that goods be transported
at the lowest possible transportation cost while maintaining supply and demand in
an optimal manner. Because the transportation costs are written as a linear function
in
of supply capacity and demand, the transportation issue is an extension of the linear
programming approach.
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The difficulty of transportation manifests itself in two ways.
●● Balanced
●● Unbalanced
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4.1.1 Introduction to Transportation Problem
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Figure: Representing basic format of Transportation Problem
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●● Linear programming problems in transportation are a subset of linear programming

problems that are related with day-to-day operations in our real lives and are
mostly concerned with logistics. It contributes to the resolution of difficulties with
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the distribution and transfer of resources from one location to another. In order
to satisfy the precise needs, the commodities are carried from a set of sources
(for example, a factory) to a set of destinations (for example, a warehouse). As
a result, transportation challenges are concerned with the transportation of a
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single product that has been made at a number of various factories (supply
origins) to a variety of different warehouses (demand destinations). The goal is
to meet demand at destinations from sources with limited supply while incurring
the least amount of transportation expense feasible. In order to reach this goal,
m
we must first determine the number of available resources as well as the quantity
of supplies requested. To calculate the cost of moving one unit of a product from
its point of origin to its point of destination, we must also know the location of
the source and destination. The model is helpful for making strategic decisions
)A
involving the selection of the most optimal transportation routes in order to allocate
the production of various plants to several warehouses or distribution hubs, as well
as for other purposes.
●● Consider the following scenario: There are multiple origins (also known as
(c
‘destinations’) from which goods must be transported to multiple destinations (also

known as ‘destinations’), and the costs of transporting or shipping the goods from

each origin to each destination are distinct and well-known to the customer. In
Notes
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order to keep shipping and transportation costs to a minimal, it is necessary to
convey goods from numerous origins to multiple destinations in the most efficient
manner possible.
in
●● As a result, the transportation challenge consists of transporting varying volumes
of a single homogeneous item, which are originally held at multiple origins, to
nl
numerous destinations while keeping the transportation cost to a bare minimum.
●● The goal of the transportation model is to estimate the amount of product that should
be delivered from each source to each destination in order to maintain supply and
O
demand needs while incurring the least amount of transportation expense.
●● An illustration might be the following: A tyre manufacturing company has m
plants in m distinct cities. In a given country, the complete supply potential of
manufactured goods is absorbed by n retail dealers in n separate cities around the
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country. Then there’s the transportation challenge, which is to figure out the best
transportation plan for moving tyres from various production locations to various
retail dealers while keeping the overall cost of transportation as low as possible.
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●● The transportation model may also be utilised to assist in the decision-making
process when choosing a site. When two or more potential locations for a new
facility, manufacturing plant, or office are under consideration, the model can
r
assist in determining the best location. The use of the approach is intended to
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reduce the overall transportation cost, distribution cost or shipping cost, and
manufacturing expenses to the bare minimum.
●● Consider the following scenario: three firms (Company1, Company2, and
Company3) that manufacture mobile phones and are situated in three separate
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geographical locations. Consider three cities (specifically, City A, City B, and

City C) where the mobile phones are carried in a similar manner as the previous
example. The firms that make mobile phones available are referred to as
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sources, while the places where mobile phones are delivered are referred to as
destinations. Sources and destinations are two different things. The transportation
of mobile phones should be carried out in such a way that the entire transportation
cost is kept to a very minimum.
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●● The transportation model is concerned with determining the best routes between
supply and demand sites in order to reduce transportation costs while taking into
account supply limits at each supply point and demand constraints at every demand
point, among other considerations. Consider the following scenario: a corporation
m
has four production sites with varying capacities, as well as five regional distribution
centres. There are a total of 4 x 5 = 20 potential paths. The transportation costs
per load for each of 20 routes between manufacturing (supply) plants and regional
)A
distribution (demand) centres, as well as supply and demand constraints, allow us

to calculate the number of loads that can be transported through different routes in
order to minimise transportation costs. The solution to this question may be simply
found by using the transportation algorithm to search for it.
●● The following scenarios make use of the transportation model:
(c

●● To make decisions about the transfer of fresh materials from various

Notes
e
distribution centres to various industrial facilities. This is extremely beneficial
in the event of a firm with many plants.
in
●● It is necessary to organise the transportation of finished items from various
manufacturing units to various distribution centres. This is beneficial for a
corporation with many plants and multiple markets.
nl
●● It is necessary to organise the transportation of finished items from various
manufacturing units to various distribution centres. This is beneficial for
a corporation with many plants and multiple markets. These are the two
applications of the transportation model. The goal is to keep transportation
O
costs as low as possible.
4.1.2 Feasible Solution Methods: Northwest Method
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The North-West Corner Rule is a method for calculating the initial possible solution
to a transportation problem that was developed in the 1960s. This approach is known
as the North-West corner method because the fundamental variables are chosen from
si
the extreme left corner of the screen.
The notion of North-West Corner can be better understood by looking at the

following transportation problem:
Source / To D E
r F Supply
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A 5 8 4 50
B 6 6 3 40
C 3 9 6 60
Demand 20 95 35 150
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Three sources, A, B, and C, each with a production capacity of 50 units, 40 units,

and 60 units of product, are listed in the following table: A, B, and C. Every day, the
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demands of three merchants D, E, and F must be met with at least 20 units, 95 units,
and 35 units of merchandise, respectively, to meet the needs of the retailers. The matrix
also includes information on the expenses of transportation.
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The demand for transportation services must be equal to the supply in order to solve
the transportation challenge. If there is a greater demand than there is supply, a dummy
origin is added to the table to accommodate the situation. A dummy origin will have a
supply that is equal to what is left over after accounting for the entire supply and total
demand. This means there will be no expense associated with using the false origin.
m
The same is true if the supply is more than or equal to the demand; in this situation,
an additional source is generated whose demand is equal to the difference between the
supply and the demand. There will be no additional expense connected with the fake
)A
source this time around.
The following technique is conducted after the demand and supply have reached a
balance:
(c

Notes
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in
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●● Cell AD should be located in the north-west or extreme left corner of the matrix,
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and as many units as feasible should be assigned to it within the restrictions of
supply and demand. Suppose 20 units are assigned to the first cell, which meets
the demand of destination D while the supply is in excess. This results in a surplus
of supply.
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●● Assign 30 units to the cell AE by moving horizontally for the next several steps. As a
result of the fact that source A has 30 units available, the supply is completely depleted.
●● r
After that, move up one row in the matrix to Cell BE and allocate 40 units to it. The
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supply of source B becomes completely depleted as well.
●● Move vertically once more, and allocate 25 units to cell CE, ensuring that the
requirement for destination E is satisfied.
●● By moving horizontally through the matrix and assigning a total of 35 units to
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cell CF, the demand and supply of the origin and destination are both completely
saturated. It is now possible to compute the overall cost.
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●● The total cost may be calculated by multiplying the number of units assigned to
each cell by the cost of transportation associated with that cell. Therefore,
●● To calculate total cost= 20×5+30×8+40×6+25×9+35×6=1015 Rs
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4.1.3 Feasible Solution Methods: Lowest Cost Method

The Least Cost Method is another technique that may be utilised to find a realistic
solution to a transportation challenge at an early stage. In this case, the allocation
process starts with the cell with the lowest cost first. The lower-cost cells are preferred
m
above the higher-cost cells in order to achieve the lowest possible transit cost.
The Least Cost Method is considered to produce more optimal results than the
)A
North-West Corner Method because it takes into account the shipping cost when
allocating resources, whereas the North-West Corner Method only considers the
availability and supply requirement, and allocation begins with the extreme left corner,
regardless of the shipping cost, and allocation begins with the extreme right corner.
As an illustration, the following issue can help you better comprehend the notion of
(c
the Least Cost method:

Source / To D E F Supply
Notes
e
A 5 8 4 50
B 6 6 3 40
in
C 3 9 6 60
Demand 20 95 35 150
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The supply of each source A, B, and C is indicated in the provided matrix, with 50
units, 40 units, and 60 units, respectively, being supplied by each source. We’ll look at
the weekly demand for three stores, which are 20 units for D, 95 units for E (and so on),
and 35 units for F (and so on). The shipping costs for all of the routes are provided.
O
Following the procedures outlined below will help you to receive the lowest
possible transportation cost:
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r si
ve
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●● In the matrix, the bare minimum cost is Rs 3, however because there is a tie in the
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cells BF and CD, the dilemma arises as to which cell we should assign the money.
In general, the cost at which the greatest possible amount may be given should be
selected in order to get the best initial solution. Therefore, 35 units will be assigned
to the cell BF in the grid system. Because of this, the demand for retailer F is met,
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and the source B is left with only 5 units remaining in inventory.

●● The bare minimal cost in the matrix is Rs 3 once again. As a result, the cell CD will
be allocated a total of 20 units. The requirement of retailer D is met as a result of
this action. With the source C, there are just 40 units remaining.
m
●● The next lowest cost is Rs 4, but because the demand for F has been met, we
will go on to the next lowest cost, which is Rs 5. The requirement of D has been
fulfilled once more. The next lowest cost is 6, and there is a tie between three cells
)A
for the lowest cost.

●● No units, however, may be given to the cells BD and CF due to the fact that the
demand for both the retailers D and F has reached saturation. As a result, we will
allocate 5 units to Cell BE. Because of this, the supply of source B becomes depleted.
(c
●● The next lowest cost is 8, and you should assign 50 units to the cell AE. The
availability of source A becomes depleted.

●● The following bare minimum cost is Rs 9; we will provide 40 units to the cell CE at
Notes
e
this time. Both the demand for and the supply of all sources and origins become
saturated as a result of this.
in
●● Calculating the overall cost is as simple as multiplying the given amount by the
cost of the cell that is being utilised. Therefore,
●● Total Cost = 50×8+5×6+35×3+20×3+40×9=955
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●● The supply and demand should be equal, and if the supply is more, the dummy
source is added to the table, with demand equal to the difference between the
supply and demand. The cost remains at zero in this scenario. In the same way,
O
if the demand exceeds the supply, a fake destination or origin is added to the
table, with the supply equal to the difference between the quantity demanded and
provided and the cost being zero.
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4.1.4 Feasible Solution Methods: Vogel’s Method
It is necessary to apply the Vogel Approximation Method to identify a workable
si
solution for the transportation of products in cases where the solution is either ideal or
very close to the optimal solution. Using this strategy, transportation expenses from one
location to another are translated into a mathematical table, which may then be utilised
to lower transportation costs even more. The demand centres are represented by the
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column, while the supply locations are represented by the row.
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Known as the Vogel’s Approximation Method (VAM), the Vogel’s Approximation
Method is an iterative technique designed to identify the earliest viable solution to the
transportation problem. Similar to the Least Cost Method, the delivery cost is taken into
consideration here as well, but in a more relative manner.
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Vogel’s Approximation Method is sometimes referred to as the Penalty Method,

because the difference costs that are chosen are nothing more than the penalties
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associated with not taking the least expensive paths.
The flow chart below depicts the processes involved in solving the transportation
issue using the Vogel’s Approximation Method. It includes the following phases:
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m
)A
(c

An illustration of Vogel’s Approximation Method is provided below to help you better

Notes
e
understand the concept:
1. Before anything else, for each row and column, the difference between two least
in
cost cells is computed, as can be seen in the iteration provided for each row and
column. Then the difference with the greatest magnitude is chosen, which in this
case is 4. As a result, allocate 20 units to cell BD, with the lowest possible cost being
nl
used to determine the allocation. There are just 20 units remaining with the source B
at this point.
O
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r si
2. Following the deletion of Column D, the difference between the lowest-cost cells is
computed for each row and column once again, as seen in the iteration below. The
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highest difference value is 3, hence 35 units should be allocated to cell AF and 15 units
should be allocated to cell AE. This causes the supply and demand of source A and
origin F to become saturated, resulting in the deletion of both row A and column F.
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m
3. Due to the fact that no difference can be identified in the remaining columns, just
one column E is left. As a result, allocate 60 units to cell CE and 20 units to cell BE,
as only 20 units are left with source B. As a result, both demand and supply are
)A
perfectly satisfied.
(c

Notes
e
in
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O
The total cost may now be calculated by multiplying the number of units allocated
to each cell by the cost associated with that cell.
As a result, the total cost is = 20×3+35×1+15×4+60×4+20×8=555 Rs
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4.2 Optimal Solution: Modified Distribution (MODI) Method
Introduction
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We can easily calculate improvement indices for each unused square using the
MODI (modified distribution) approach without having to draw all of the closed routes.
r
As a result, it may frequently save a lot of time when compared to other means of
resolving transportation issues.
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MODI introduces a novel method for locating the most underutilised route with
the greatest negative improvement index. We only need to trace one closed route
after we’ve found the greatest index. This approach assists in determining the greatest
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number of items that can be transported via the most underutilised route.
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m
4.2.1 Optimal Solution: Modified Distribution (MODI) Method

)A
The MODI approach is an enhancement over the stepping stone method in several
ways. This model investigates how to reduce the cost of carrying a commodity from a
number of origins to a number of destinations to the absolute minimum. Both the supply
at each source and the demand at each destination are fully understood in advance.
(c
The Modified Distribution Way, often known as MODI, is an efficient method of

determining whether or not the original viable solution is optimum.

The Modified Distribution Method is comprised of many steps (MODI):

Notes
e
1. Select one of the three strategies listed below to arrive at an initial basic workable
solution:
in
●● North West Corner Rule
●● Matrix Minimum Method
●● Vogel Approximation Method
nl
2. Determine the values of the dual variables, ui and vj, using the equation ui + vj = cij.
3. Substitute cij - (ui + vj) to obtain the opportunity cost.
O
4. Verify that each opportunity cost has a positive indication. If the opportunity costs of
all the empty cells are either positive or zero, the given solution is the optimal solution.
Otherwise, the given solution is not the best solution. When one or more vacant cells
have a negative opportunity cost, however, the suggested solution is not the ideal
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option, and additional transportation cost reductions are likely to be realised.
5. The vacant cell with the lowest negative opportunity cost should be selected for
inclusion into the next solution.
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6. Drawing a closed path or loop for the vacant cell that was picked in the previous
phase is the sixth step. Important: Please keep in mind that on this course, the right
r
angle turn is only authorised at occupied cells and at the initial vacant cell.
ve
7. Add alternating plus and minus signs to the vacant cells at the corner points of the
closed route, with a plus sign at the cell that is being assessed.
8. Determine the maximum number of units that should be transported to this vacant
cell in order to avoid overcrowding. According to the closed route, the smallest value
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with a negative position shows the maximum number of units that may be transported
to the entering cell. Now, add this amount to all of the cells on the corner points of the
closed route that are indicated with plus signs, and remove it from all of the cells on
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the corner points of the closed path that are marked with minus signs. As a result, a
vacant cell is transformed into an occupied cell.
9. Repeat the entire technique until an optimal solution has been found.
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Illustration
1. The following is a basic, workable solution at the outset.
m
)A
(c

Optimality: m+n-1=
Notes
e
3+3-1= 5
Total Cost: 20×6+30×4+40×8+25×4+35×2=730
in
2. To do this, use the following equation to compute the values of ui and vj
ui+vj = Cij
nl
Substituting the value of u1 as 0
U1+V1 = C11, 0+V1 = 6 or V1 = 6
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U1 +V2 = C12, 0+V2 = 4 or V2 = 4
U2+V2 = C22, U2+4 = 8 or U2 = 4
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U3+ V2 = C32, U3+4 = 4 or U3 = 0
U3+V3 = C33, 0+V3 = 2 or V3 =2
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3. The third step is to determine the opportunity cost of the vacant cells (AF, BD, BF,
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and CD) by applying the following formula to the data:

Cij – (ui+Vi)
AF = C13 – (U1+V3), 1- (0+2) = -1 or 1

m
BD = C21 – (U2+v1), 3- (4+6) = -7 or 7
BF = C23 – (U2+V3), 7- (4+2) = 1 or -1
CD = C31- (U3+V1), 4- (0+6) = -2 or 2

)A
4. Choose the opportunity cost with the highest positive opportunity cost, which is 7, and
create a closed path as indicated in the following matrix. Begin with the first vacant
cell and alternately assign the “+” and “–” signs. As a result, the most favoured cell is
BD, and as many units as feasible should be assigned to it.
(c

Notes
e
in
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O
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5. The matrix below indicates the maximum allocation to the cell BD, and the amount of
units allocated to that cell is added to the cell with a positive sign and deducted from
the cell with a negative sign in the matrix below.
r
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m
6. Repeat steps 1 through 4, that is, calculate the opportunity costs for each vacant
cell and allocate the greatest number of units feasible to the cell with the highest
opportunity cost. This procedure will continue until the most optimal option has
been found.
)A
It is preferable to the stepping stone approach because it can be applied more

efficiently when a big number of sources and destinations are involved, whereas the
stepping stone method becomes fairly difficult or tiresome when a large number of
sources and destinations are involved.
(c
Since the modified distribution method reduces the number of steps involved in the
evaluation of empty cells, the complexity is reduced as well, and the opportunity

cost of each empty cell can be determined using a straightforward computational

Notes
e
scheme, the modified distribution method is recommended.
4.3 Unbalanced Transportation Problem and Its Solution
in
Introduction
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The problem is classified as an imbalanced transportation problem when the entire
supply of all sources does not meet the total demand of all destinations.
In the actual world, supply and demand needs will almost never be the same. As
O
a result of fluctuations in production from the supplier’s end and variations in prediction
from the customer’s end, the situation has changed. A paucity of raw materials, labour
issues, and incorrect planning and scheduling on the part of the transportation model
are all possible causes of supply fluctuations. Customers’ preferences, pricing changes,
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and the introduction of new items by rivals all have the potential to influence fluctuations
in consumer demand. The use of dummy sources and dummy destinations can readily
correct these imbalanced situations. The addition of a dummy destination (dummy
column) with demand equal to the supply excess occurs when the entire supply is
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larger than the total demand. The addition of a dummy source (dummy row) with supply
equal to the demand excess occurs when the overall demand exceeds the total supply
in the market. Due to the fact that no shipment is really performed in the event of a
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fake source and destination, the unit transportation cost is assigned zero values for the
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fictitious column and row.
4.3.1 Unbalanced Transportation Problem

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A particularly excellent application area for the linear programming approach is

widely believed to be the challenge of moving a product from several factories (supply
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sources) to multiple warehouses (demand destinations). A balanced transportation

problem is defined as one in which the total number of units available at the supply
origins equals the total number of items available at the demand destinations. If these
two values are not equal, the situation is referred to be an imbalanced situation. It is
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necessary to first balance an imbalanced transportation problem by establishing a

fictitious origin or destination before attempting to solve it.
It is necessary to include a fictitious source or destination in order to balance a

transportation situation when demand does not equal supply.
m
However, there are several instances in which the whole supply does not equal
the total demand. As a result, an imbalanced transportation problem is defined as a
transportation problem when there is an uneven supply and demand.
)A
How to solve such types of problems

Once we have determined that the overall supply exceeds the total demand,
we will add an additional column, which will represent the surplus supply with a
(c
transportation cost of zero. Additionally, if the entire demand exceeds the total supply,
an additional row is added to the table, representing unmet demand at no additional
cost due to the absence of any transportation costs.

It is possible to add an additional column (known as a dummy demand centre) to

Notes
e
the transportation table in order to absorb any surplus supply that occurs if the total
supply exceeds total demand. Due to the fact that these product items are neither
manufactured nor sent, the unit transportation cost for the cells in this column is set
in
equal to 0 for these cells.
Alternatively, if the entire demand exceeds the total supply, a fake row (also known
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as a dummy supply centre) can be included in the transportation table to account for the
extra quality of demand. In this scenario, the unit transportation cost is set to 0 for all of
the cells in the dummy row as well.
O
When the overall availability at the origins does not meet the total requirements
at the destinations, a transportation problem is known as an unbalanced transportation
problem. As an example, if the entire production of four factories is 1000 units, and the
total demand of four warehouses is 900 units or 1,100 units, the transportation problem
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is said to be imbalanced. The introduction of dummy origin(s) or fake destination(s) (as
the case may be) with zero transportation cost per unit can be used to transform an
imbalanced transportation problem into a balanced transportation problem.
si
The following example illustrates the process of balancing an imbalanced
transportation situation.
r
Consider the following scenario: a firm has three warehouses: warehouse 1,
warehouse 2, and warehouse 3. The corporation has three warehouses. Retailer A and
ve
Retailer B are customers of the corporation, which supplies them with materials. The
supply and demand for warehouses and retailers are depicted in the table below. The
supply from each warehouse, the demand from each store, and the distance between
the separate warehouses and the retailers are all displayed in the table. The cost of
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transportation may be calculated by multiplying the distance between the warehouse

and the retailer by the cost of transportation.
Warehouse1 Warehouse 2 Warehouse 3 Supply

U
Retailer A 10 25 10 3000
Retailer B 15 8 6 2500
Demand 2000 3000 2000
ity

The situation can be eased by establishing phantom dealers or dummy suppliers,
who will either provide or absorb the surplus. Then the above situation ultimately comes
down to the following sequence
m

Retailer A 10 25 10 3000
Retailer B 15 8 6 2500
)A
Dummy Retailer 0 0 0 1500

Demand 2000 3000 2000 7000
Since, the dummy supplier or dealer does not exist in reality, the cost of
transportation from the various warehouses to the retailers is assumed to be zero.
(c
When it comes to finding a solution, algorithms or linear programming equations can

now be applied effectively.

4.3.2 Unbalanced Transportation Problem and Its Solution

Notes
e
Unbalanced problems are commonly encountered in operations research while
dealing with transportation challenges, when the overall supply does not meet the
in
whole demand for a certain service. Typically, the primary goal of a transportation
challenge is to identify the transportation plan that reduces total transportation costs
while still fulfilling the needs of both supply and demand. However, in fact, the issues
nl
that we are confronted with entail uneven situations in which the supply and demand
are not equally distributed.
Once we have determined that the overall supply exceeds the total demand,
O
we will add an additional column, which will represent the surplus supply with a
transportation cost of $0. Additionally, if the entire demand exceeds the total supply, an
additional row is added to the table, representing unmet demand at no additional cost
due to the absence of any transportation costs. The following example illustrates the
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process of balancing an imbalanced transportation situation.

Retailer A 28 17 26 500
si
Retailer B 19 12 16 300
Demand 250 250 500
r
The overall demand for the product is 1000, while the total supply for the product
ve
is 800. Which highlights that the total demand is not equal to total supply. Therefore we
need to firstly balance this problem to obtain a feasible solution.
Total supply < Total demand

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In order to fix the problem, we propose an extra row with transportation cost zero,
which indicates the unfulfilled portion of demand.

U
Retailer A 28 17 26 500
Retailer B 19 12 16 300
Unsatisfied 0 0 0 200
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Demand
Demand 250 250 500 1000
The following allocations are obtained by employing the matrix minimum approach.
m
)A
(c

Initial basic feasible solution

Notes
e
50 X 28 + 450 X 26 + 250 X 12 + 50 X 16 + 200 X 0 = 16900
in
4.4 Degeneracy and Its Resolution; Multiple Optimal Solutions;
Maximization Transportation Problem
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Introduction
Assuming that there are m sources of supply and n demand destinations in
a normal transportation issue, the test of optimality of any possible solution requires
O
allocating resources into independent cells in the number of cells equal to m + n – 1. In
degenerate solutions, the number of allocations is less than the number of allocations
that are required by the problem.
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4.4.1 Degeneracy
When a basic viable solution has less allocations (occupied cells) than m + n – 1
si
allocations (occupied cells) in a transportation issue with m origins and n destinations,
the problem is said to be a degenerative transportation problem.
r
At two times in the process, degeneracy might occur: at the initial solution phase,
and later during the testing phase of the optimal solution phase.
ve
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U
ity
m
)A
Figure: Methods for resolving the transportation problem

(c
associated with degeneracy

This will address degeneracy in the transportation problem using an example that
Notes
e
will be presented in detail.
Question
in
D1 D2 D3 D4 D5 Supply (Si)
S1 10 2 3 15 9 35
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S2 5 10 15 2 4 40
S3 15 5 14 7 15 20
S4 20 15 13 25 8 30
O
Demand(Dj) 20 20 40 10 35

Solution:
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This is a balanced transportation problem, because the whole supply equals the
total demand in this situation.
D1 D2 D3 D4 D5 Supply (Si)
si
S1 10 2 3 15 9 35
S2 5 10 15 2 4 40
S3 15 5 14 7 15 20
S4 20 r 15 13 25 8 30
ve
Demand(Dj) 20 20 40 10 35 125
Initial basic viable solution: The Least Cost Cell Method will be used to determine
the initial basic feasible solution in this situation. In addition to the NorthWest Corner
ni
Method and Vogel’s Approximation Method, one may utilise the NorthWest Corner
Method and Vogel’s Approximation Method to identify the initial basic viable answer.
The following answer is obtained by employing the Least Cost Cell Method:
U
ity
m
)A
(c
The U-V Method is used to optimise the solution. The following are the results of
the optimization:

Check to see if m + n – 1 equals the total number of cells that have been
Notes
e
assigned. The number of allotted cells in this example is 7, hence the degeneracy in
the transportation problem is 4 + 5 – 1 = 8. In this situation, m + n – 1 = 4 + 5 – 1
= 8, whereas the total number of allocated cells is 7. Consequently, in this scenario,
in
we convert the necessary number of unallocated cells (in this example, m + n-1 – the
total number of allocated cells, or 8 – 7 = 1) into allocated cells in order to meet the
aforementioned criterion.
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The following are the steps to converting unallocated cells into assigned cells:
●● Begin with the least significant value of the unallocated cell.
O
●● Check the development of the loops one by one.
●● The formation should not be in a closed-loop configuration.
●● Select that loop as a new allocated cell and assign the value ‘e’ to it to complete
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the circuit.
●● The closed loop can have any shape, but it can only have one turning point,
which should be at the cell where the loop was begun or in the cell where the loop
si
was allocated.
There are 13 cells that have not been assigned. Choose the smallest possible
r
value (in this example,5), from among the unallocated cells. There are two 5s in this
pile, and you can choose either one of them at random. Let’s choose the cell that has a
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star in it.
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U
ity
m
Check to see whether there is a closed-loop formation that starts from this
)A
particular cell. The observation that this cell cannot be reached to complete the closed-
loop may be made if a closed-loop is derived from this cell in accordance with the
criteria for a closed-loop. Consequently, this cell will be picked and given the random
value ‘e.’
(c

Notes
e
in
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O
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Observation: If a closed loop could have been built from that cell, we would attempt
another cell with the lowest value and repeat the method to see if a closed loop could
si
be formed from that cell or not. The total number of allotted cells has increased to 8,
and m + n – 1 = 4 + 5 – 1 = 8 has been calculated. The U-V approach may now be
used to improve the performance of this solution. After doing optimization using the U-V
r
approach, we arrive at the following result.
ve
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U
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In the final solution, the existence of two ‘e’s indicates that the requirement for
degeneracy will be satisfied once again once a number of optimization rounds have
m
been completed.
When calculating the overall cost, just leave off the ‘e’ and multiply the allocated
amount by the cost value of the cell in which it is situated, then add them all together.
)A
Accordingly, the transportation costs are as follows: 35×3+20×5+10×2+10×4+20×5+5×

13+25×8=630
4.4.2 Degeneracy Resolution

(c
To resolve degeneracy, the conventional method is to allocate an infinitesimally

small amount e to one of the independent cells, that is, to allocate a small positive
quantity e to one or more unoccupied cells that have the lowest transportation costs, in

order to make m + n – 1 allocations (that is, to satisfy the condition N = m + n – 1) and

Notes
e
thus to resolve degeneracy.
As a result, the allocation of e should avoid the creation of a closed loop and
in
should not have a path through it. Once this is completed, the optimality test is carried
out, and if required, the solution is refined in the conventional manner until optimality
is achieved.
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When resolving the degeneracy problem, we make use of an artificial quantity to
help us (d). The amount d is assigned to the cell with the lowest transportation cost,
which happens to be the only one that is empty.
O
For the sake of this computation, the value of d is considered to be zero. The
following example demonstrates how to make use of the letter d.
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Question:
Dealer 1 Dealer 2 Dealer 3 Dealer 4 Supply

Factory 2 2 2 4 1000
si
A
Factory 4 6 4 3 700
B
Factory
C
3 2 1r 0 900
ve
Demand 900 800 500 400

Solution: The Matrix Minimum Method is used to obtain an initial basic viable
solution that is practicable.
ni
U
ity
m
The number of fundamental variables is equal to m + n – 1 = 3 + 4 – 1 = 6.

)A
It is a degenerate transportation issue due to the fact that the number of

fundamental variables is fewer than six in number.
When dealing with degeneracy, we make use of an artificial quantity to help us (d).
(c
The amount d is assigned to the cell with the lowest transportation cost, which happens
to be the only one that is empty.

Because the amount d is so little, it has no effect on the supply and demand
Notes
e
limitations in the market.
In the above table, there is a tie for the smallest vacant cell when it comes to
in
picking the smallest cell. In this case, you have complete freedom to pick whichever cell
you choose. As seen in the accompanying table, we choose cell C2 as our selection.
nl
O
ty
si
Now we’re going to utilise the stepping stone approach to figure out what the best
option is?
r
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Calculating the value of missed opportunities
Unoccupied cells Increase in cost per unit of reallocation Comments

A3 +2 – 2 + 2 – 1 = 1 Cost Increases
A4 +4 – 2 + 2 – 0 = 4 Cost Increases
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B1 +4 – 6 + 2 – 2 = –2 Cost Decreases
B3 +4 – 6 + 2 – 1 = –1 Cost Decreases
B4 +3 – 6 + 2 – 0 = –1 Cost Decreases
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C1 +3 – 2 + 2 – 2 = 1 Cost Increases
The cell B1 has the most possibility for improvement, which is equal to a negative
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value. As a result, the maximum amount that may be allotted to B1 is 700, resulting
in the non-basic status of the present basic variable corresponding to cell B2. The
following table depicts the better answer to the problem.
m
)A
(c

The best possible answer is

Notes
e
2×200+2×800+4×700+2×d+1×500+0×400=5300+2d
It is important to note that because d is a relatively tiny amount, it may be ignored
in
in the best solution. As a result, the net transportation expense is Rs. 5300.
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Linear programming issues are connected with the idea of numerous optimum
solutions. In a linear programme having more than one set of fundamental solutions
O
that may reduce or maximise the needed objective function, several optimum solutions
will emerge. The alternate fundamental solution is a term used to describe numerous
excellent answers.
In the case of an assignment issue, there are likely to be two or more methods to
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eliminate a certain amount of zeros. Multiple optimum solutions with the same optimal
value of the objective function are shown in this instance. As a result, in an assignment
situation, the total cost or total profit will stay the same for various sets of allocation.
si
The availability of many optimum solutions in the simplex method is stated by a
condition in which a non-basic variable in the final simplex table shows the problem’s
ideal solution and the net amount of contribution is zero.
r
When a problem has numerous optimum solutions, the decision maker will select
ve
the most appropriate set of the basic answer as the linear programme solution.
Multiple optimum solutions are not a major issue since the presence of other solutions
does not prohibit the researcher from identifying one ideal answer to the problem.
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Although software such as MS Excel may be used to solve the linear issue, it
only delivers one best answer among several. When there is a chance of numerous
optimum answers, it is appropriate to solve the issue manually to acquire all of the
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fundamental solutions.
The belief that optimization problems have just one solution is a widespread fallacy
among newcomers in optimization. Surprisingly, this is not always the case. For many
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practical situations, a small number of variables dominate the goal (whether it’s cost,
income, or something else), whereas the majority of variables are just there to assure
that the solution can really work. Consider a staffing issue, where the cost is often
determined by the number of people who work on a particular day rather than by the
individuals themselves.
m
)A
(c

Notes
e
in
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O
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4.4.4 Maximisation Transportation Problem
si
There are some sorts of transportation issues where the objective function
should be maximised rather than minimised, and this is one of them. To answer these
issues, first turn the maximising problem into a minimization problem. Essentially, the
r
transportation problem is a minimization problem, with the goal function being to reduce
ve
the overall cost of transportation to the lowest possible level.
There are some kinds problems of transportation where the objective function
should be maximised rather than minimised, and this is one of them. Such challenges
can be resolved by transforming the maximising problem to a minimization problem.
ni
This is accomplished by removing the unit costs from the table’s greatest unit cost,
which results in a conversion from maximising to minimization. The following example
illustrates how to solve the problem of transportation maximisation.
U
Question:
Shubham Textiles has three factories, each of which is located in a different city,
namely X, Y, and Z. These manufacturers provide consignments to four different
ity
dealers, designated as A, B, C, and D. Dealers may be found all across the nation.
310, 100, and 290 units per month are produced at each of these plants’ respective
production capacities. The following table shows the net return on investment per unit of
goods sold:
m
Dealers / Factory A B C D Capacity

X 6 6 6 4 310
Y 4 2 4 5 100
)A
Z 5 6 7 8 290
Requirement 150 130 120 300 700
Determine the most appropriate allocation in order to maximise the overall return.
(c

Solution:
Notes
e
This is an example of a maximising problem. Thus, we must first transform this
into a minimization problem in order to move on. The change from maximising to
in
minimization is accomplished by removing the unit cost of the table from the greatest
unit cost in the optimization process. Take a look at the table; the number 8 represents
the highest unit cost. Consequently, we reduce all of the unit costs from the total of 8,
nl
and we obtain the new minimization transportation table, which is shown below.
Dealers / Factory A B C D Capacity

X 6 6 6 4 310 = a1
O
Y 4 2 4 5 100 = a2
Z 5 6 7 8 290 = a3
Requirement 150 = b1 130 = b2 120 = b3 300 =b4 700
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We may now approach the problem as if it were a minimization problem.
We must first determine the most fundamentally possible solution, which we shall
do using the (LCM)
r si
ve
ni
Thus, the optimum feasible solution by ( LCM ) method is calculated as follows :

U
x11=150, x12=130, x13=30, x23=90, x24=10 and x34=290.
Once the basic feasible solution has been calculated then the next step is that
we have to determine the optimum solution. Here we will use MODI method (Modified
Distribution Method). By using this method we obtain
ity
u1+v1=2 , u1+v2=2 , u1+v3=2 , u2+v3=4 , u2+v4=3 , u3+v4=0.
Taking u1=0 arbitrarily we obtain
u1=0, v1=2, v2=2 and v3=2, u2=2, v4=1, u3= - 1

m
By verifying the condition of optimality, we get:
●● Cell (1,4) = 4 – 0 – 1 = 3
)A
●● Cell (2,1) = 4 – 2 – 2 = 0
●● Cell (2,2) = 6 – 2 – 2 = 2
●● Cell (3,1) = 3 – (–1) – 2 = 2
●● Cell (3,2) = 2 – (–1) – 2 = 1
(c
●● Cell (3,3) = 1 – (–1) – 2 = 0

So, the optimality condition is satisfied.

x11=150, x12=130, x13=30, x23=90, x24=10 and x34=290.Thus, the maximum

Notes
e
return is:
6×150+6×130+6×30+4×90+5×10+8×290=4590
in
Exercise:
Q1. Four companies viz. W, X, Y and Z supply the requirements of three warehouses viz.
nl
A, B and C respectively. The companies’ availability, warehouses requirements and
the unit cost of transportation are given in the following table. Find an initial basic
feasible solution using :
O
a. North West Corner Method
b. Least Cost Method
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c. Vogel Approximation Method (VAM)
Warehouse A Warehouse B Warehouse C Supply

Company W 10 8 9 15
si
Company X 5 2 3 20
Company Y 6 7 4 30
Company Z 7 6 9 35
Demand 25 r 26 49 100
ve
Key solution:
a. Minimum cost 753
b. Minimum cost 542
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c. Minimum cost 542

Q2. Find the optimum Solution of the following Problem using MODI method
U
Destination 1 Destination 2 Destination 3 Supply

Source A 8 9 10 42
Source B 9 11 11 30
Source C 10 12 9 28
ity
Demand 35 40 25 100
Key solution:
Minimum transportation optimal cost is 901
m
Q3. The ABT transport business transports truckloads of food grains from three different
suppliers, namely X, Y, and Z, to four different mills, namely A, B, C, and D. The
following transportation table provides information on the supply and demand, as
)A
well as the unit transportation cost per truckload on the various routes covered.
Assume that the unit transportation expenses are in the hundreds of dollars per unit
of transportation. By employing the MODI approach, you may determine the optimal
minimal shipping cost of transportation.
(c

Destination Destination Destination Destination Supply

Notes
e
A B C D
Source X 10 2 20 11 15
in
Source Y 12 7 9 20 25
Source Z 4 14 16 18 10
Demand 5 15 15 15
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Key solution:
Minimum Optimum cost is 435
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Q4. Dresses are classified into the following categories and quantities:
Dress Type V W X Y Z
Quantity 150 100 75 250 200
ty
The tenders are filed by four separate dressmakers, each of whom agrees to
deliver no more than the amounts specified below:
si
Dress Maker A B C D
Dress Quantity 300 250 150 200
r
According to the store’s predictions, the profit per dress will vary depending on the
dress manufacturer, as shown in the following table:
ve
V W X Y Z
A 2.75 3.5 4.25 2.25 1.5
B 3 3.25 4.5 1.75 1
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C 2.5 3.5 4.75 2 1.25

D 3.25 2.75 4 2.5 1.75
U
Determine how the orders for the dresses should be placed in order to optimise the
profit margin.
Key solution:
ity
Maximum profit 1687.50

150 dresses of V and 50 dresses of Z by dressmaker A
250 dresses of Y by dressmaker B
m
150 dresses of Z by dressmaker C

100 dresses of W and 75 dresses of X by dressmaker D
)A
Case Study
Total Cost Minimization Transportation Problem – A Case Study of Carl Star

Introduction
(c
As manufacturing and supply networks have developed to service an increasingly

demanding succession of consumers in numerous countries, supply chains have
become “a problem.”
For successful administration of these supply chain networks, coordination of

Notes
e
product material flow and information flow across all levels of the supply chain is
critical. As a result, the impact of manufacturing goods on society is determined by
the effectiveness of the sector’s supply chain and logistical services. The creation of a
in
robust distribution network is required for the timely transfer of the materials required
for manufacturing. Previous research has found that, while a good distribution network
reduces costs and maximises profits when shipping finished products to customers and
nl
consumers, poor distribution caused by an inefficient transportation system can disrupt
the supply chain, resulting in the unavailability of raw materials or finished products,
and, as a result, affecting the economy on a national and individual level [5]. This is
O
most likely because an efficient transportation infrastructure guarantees high availability
and cheap transportation costs relative to inventory costs, promoting quick and frequent
delivery via “
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“An effective transportation system (a component of logistics) is necessary for
economic development and progress,” these keys suggest.
Without economic and dependable infrastructure, such as roads, attaining and
si
maintaining growth is difficult. In light of the manufacturing sector’s distribution issues
(e.g., high distribution costs) and their influence on the economy as a whole, this
research aimed to improve transportation models of manufactured items to consumers
r
at the lowest transportation cost.
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Objectives
●● To investigate the effect of developing low-cost logistics methods.
●● The optimization of planning in the distribution system to determine the optimum
ni
number of items ordered.

●● To determine the best routing option for each of the company’s and its
implementations in order to save transportation and tariff expenses.
U
●● To examine the model, the goal is to reduce the overall cost of all transportation,
tariff, and handling charges, as well as their effect.
Model development
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The ideal product flow for Carl Star’s items, categorised by market sector, was
identified using an Excel-based mixed integer linear programme (MILP) model. The
model’s goal function is to reduce the overall cost of all transportation, tariff, and
handling charges.
m
The model variables represent the various flow pathways that the product might
travel from the point of production to each consumer: straight from the manufacturer
)A
to the customer or manufacturer to DC to customer. A demand constraint guarantees

that each customer’s demand is satisfied. A transshipment restriction was also imposed,
mandating that for each product provided from a DC, sufficient product be transported
to that DC from the relevant production facilities.
(c
Vision
A well-designed decision support system will assist decision makers in extracting
relevant information from raw data, papers, and personal expertise in order to discover,
solve, and make choices. Logistics cost models as components of decisionmaking

Notes
e
support systems are built utilising a variety of cost and mathematical methodologies,
which explains why they range in complexity, purpose, and usefulness.
in
Regardless, the three factors that characterise the usefulness of the literature
are the degree of the decision-making process, the logistical costs analysed, and the
knowledge transmission.
nl
Mission
Companies and organisations have broadened the scope of logistics optimization
O
to include strategic, tactical, and operational decision-making. “Because the features of
the various levels of the decision-making process come from research on space and
time (the horizon and period of the decision-making process) as well as hierarchical
analyses, it’s critical to figure out how many of these characteristics each model has.
ty
Due to their field of study, the authors developed logistics cost models that address
areas of strategic importance: construction of an optimal strategy for the delivery of
goods, implementation of an adequate distribution network, determination of the optimal
si
quantity of ordered products, optimization of distribution system planning, analysis of
transport destinations, logistics network coordination, and distribution of c A model
that can combine specialised logistics cost-cutting solutions into a single criteria for
r
strategic, tactical, and operational decisionmaking is not only beneficial in general, but
ve
also systematically handles all of a company’s logistical expenses.
“The goal of our study was to develop a broadly applicable model that incorporates
strategic, tactical, and operational decision-making into a single criteria.” The
systematic logistics decision model (SLDM) is simple to use and is accessible to
ni
workers at various organisational levels and for various business tasks with the goal of
controlling the company’s overall logistics expenses.”
U
Results and discussion

The model was ran using numerous situations as inputs. These simulations
revealed the system’s vulnerability to numerous changes, such as tariff adjustments,
transportation rates, demand fluctuations, and handling cost variations. It’s worth noting
ity
that adjustments in tariffs and transportation rates didn’t have as much of an impact on
the optimum transportation flows as one would assume.
The ideal flow indicated by the model was more significant for tiny changes in
handling or demand.
m
When contrasted to the ideal model, the baseline model allows for the discovery
of potential savings between what is being done and what might be done. When the
overall calculated baseline cost is compared to the current actual expenses, the
)A
difference indicates how accurate the assumptions and model are in comparison to
current execution. The comparison between the baseline costs, the ideal costs, and the
different scenarios was the emphasis of this investigation.
(c

Notes
e
in
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O
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Figure 1 Baseline Distribution Cost
si
The model’s ideal solution incorporates a considerable increase in direct shipments
from the manufacturer to the client. While the cost of transportation to the client
increases, the cost of processing as well as the cost of shipments to the DC is much
r
lower, lowering the total cost of the distribution channel solution.
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ni
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Figure 2 Optimal Makeup of Distribution costs

m
As shown in Table 1, the ideal option selected by the model would save the
organisation 17 percent of the existing baseline, or over $400K for each biweekly
delivery cycle. Figure 3 depicts the development of an ideal solution in comparison to
)A
the baseline.
(c

Table 1 Costs of Scenarios

Notes
e
Estimated cost per Bi-weekly Shipment
Optimal Baseline % change
in
Freight Cost-MFG to DC 151785 455609 -67%
Freight Cost-DC to Customer 108361 619331 -83%
Freight Cost-MFG to Customer 843598 110939 660%
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Handling Cost 405768 763494 -47%
Tariffs 677263 671936 1%
Total 2186775 2621310 -17%
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ty
r si
ve
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Figure 3 Baseline vs Optimal Solution Costs
The bulk of shipments to Carl Star’s clients now come from a DC.
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As shown in Table 2, the optimal solution determines that direct shipments from
manufacturer to customer are the most cost-effective shipping mode for the bulk of
their demand.
The number of clients serviced per market sector and origin is substantially lower,
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suggesting that Carl Star should focus on a few major customers for a cost-cutting shift
in transportation flow.
)A
(c

Optimal Solution Delivery Period Yearly Cost

Notes
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MFG to DC 151785 455609
Freight cost DC to Customer 108361 2817394
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MFG to Customer 843598 21933546
Handling Cost 405768 10549978
Tariffs 677263 17608825
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Total 2186775 56856150
By MFG/Customer By Unit
MFG to Customer 240 353909
#
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DC to Customer 2107 126072
Direct to Customer 10% 74%
%
DC to Customer 90% 26%
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Changes in the tariff rate did not dramatically impact the cost of the ideal solution,
as shown in Table 3, based on many model runs with tariffs ranging from 0% to 225
percent of unit cost. Optimal flow when tariffs increased from 0% to 5% to 10%, but
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beyond 15%, any rise in the tariff rate had no effect on the optimal transportation flows.
Conclusion
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“A new way to manage logistical expenses,” according to the paper.
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More testing at other firms and on different goods is required to gain improvements
in terms of estimating the sorts of logistics costs that were not included into the
verification of the model’s application in the G9 hinge. Because the model is intended
to assess the logistics costs of a particular product, future research should focus on
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evaluating the model’s integration capabilities into a single management information

system that includes all of a company’s goods.”
“The models are not focused at total logistics costs, but at the specific link between
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transportation, storage, and inventory costs,” the authors conclude.
These expenses are the subject of scientific research since they make up the bulk
of the logistics cost structure. Other logistics costs are investigated to a lesser degree
because various authors identify and combine them with the three most often studied
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categories of logistics costs. Furthermore, logistics costs and their linkages are difficult
to assess and much more difficult to convert into a cost model since they are impacted
by so many exogenous variables, many of which are non-stationary. This should not,
however, deter us from developing a system that can be used to analyse and quantify
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all logistical costs, as well as try to successfully convert environmental changes into
a cost model. This may be accomplished if logistics models are built in a manner that
allows them to be updated with new cost factors.”
)A
We didn’t see any substantial changes in “the ideal transportation flow” as a

result of changes in transportation rates. This shows that the transportation network
architecture is more resilient and does not need frequent alterations after an optimum
flow has been determined. The transportation flows were also not particularly
responsive to demand swings, thus the ideal flow would be beneficial to Carl Star
(c
throughout both their normal and peak seasons. However, as demand grew, it became
more cost efficient to ship directly to the buyer. The model, on the other hand, was very
responsive to changes in handling costs.

The best solution without handling charges used a considerably more efficient
Notes
e
transportation structure than the flows that had to account for handling expenses.
Carl should look at the handling charges at each site and for each market group, it
is suggested. The model might then be updated with the newly determined handling
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costs to acquire a better understanding of the most cost-effective flow network. Outside
factors did not substantially modify the ideal flows for Carl star as much as influences
inside Carl star’s control, it may be determined. Carl Star has the greatest influence
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over the major levers, which are cost and demand management. As a result, Carl Star
is well positioned to weather changes in transportation and tariff rates.
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Questions for case study
1. What suggestion would you give to how successful administration of these supply
chain networks can be done?
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2. Comment on the transportation structure
3. Suggest a best solution for Carl to this problem
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Summary
●● Models of transportation may be divided into four categories: microscopic,
mesoscopic, macroscopic, and metascopic. Individual aspects of transportation
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systems, such as individual vehicle dynamics and individual passenger behaviour,
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are studied using microscopic models. Mesoscopic models look at transportation
components in tiny groupings and believe them to be homogenous. Vehicle platoon
dynamics and household-level travel behaviour are two examples. Aggregated
traffic flow dynamics and zonal-level travel demand analysis are examples of macro
models that deal with aggregated features of transportation aspects.
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●● The Transportation Model is a specific example of the LPP (Linear Programming

Problem), in which the primary goal is to move a product from multiple origins to
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numerous destinations at the lowest possible cost overall.

●● Transport Models are characterised by the knowledge of the sources and
destinations, as well as the knowledge of the supply and demand at each source
and destination
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●● The transportation model is concerned with the notion of transporting

something from one location to another without causing it to change. Based
on the assumption that any damage sustained while travelling has negative
repercussions, it is used to examine transportation networks and determine the
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most effective path for resource allocation. The transportation problem is a special
type of Linear Programming Problem (LPP) in which goods are transported from
a set of sources to a set of destinations while taking into consideration the supply
)A
and demand of the sources and destinations, respectively, in order to reduce

the total cost of transportation as much as possible. It is also referred to as the
Hitchcock issue in some circles.
●● Linear programming problems in transportation are a subset of linear programming
problems that are related with day-to-day operations in our real lives and are
(c
mostly concerned with logistics. It contributes to the resolution of difficulties with

the distribution and transfer of resources from one location to another.

●● The transportation model may also be utilised to assist in the decision-making

Notes
e
process when choosing a site. When two or more potential locations for a new
facility, manufacturing plant, or office are under consideration, the model can
assist in determining the best location. The use of the approach is intended to
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reduce the overall transportation cost, distribution cost or shipping cost, and
manufacturing expenses to the bare minimum.
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●● The North-West Corner Rule is a method for calculating the initial possible solution
to a transportation problem that was developed in the 1960s. This approach is
known as the North-West corner method because the fundamental variables are
chosen from the extreme left corner of the screen.
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●● The demand for transportation services must be equal to the supply in order to
solve the transportation challenge. If there is a greater demand than there is
supply, a dummy origin is added to the table to accommodate the situation. A
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dummy origin will have a supply that is equal to what is left over after accounting
for the entire supply and total demand. This means there will be no expense
associated with using the false origin
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●● The Least Cost Method is another technique that may be utilised to find a realistic
solution to a transportation challenge at an early stage. In this case, the allocation
process starts with the cell with the lowest cost first. The lower-cost cells are preferred
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above the higher-cost cells in order to achieve the lowest possible transit cost.
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●● Known as the Vogel’s Approximation Method (VAM), the Vogel’s Approximation
Method is an iterative technique designed to identify the earliest viable solution to
the transportation problem. Similar to the Least Cost Method, the delivery cost is
taken into consideration here as well, but in a more relative manner.
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●● MODI introduces a novel method for locating the most underutilised route with
the greatest negative improvement index. We only need to trace one closed route
after we’ve found the greatest index. This approach assists in determining the
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greatest number of items that can be transported via the most underutilised route.
●● The addition of a dummy destination (dummy column) with demand equal to the
supply excess occurs when the entire supply is larger than the total demand. The
addition of a dummy source (dummy row) with supply equal to the demand excess
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occurs when the overall demand exceeds the total supply in the market. Due to
the fact that no shipment is really performed in the event of a fake source and
destination, the unit transportation cost is assigned zero values for the fictitious
column and row.
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●● A particularly excellent application area for the linear programming approach is

widely believed to be the challenge of moving a product from several factories
(supply sources) to multiple warehouses (demand destinations). A balanced
)A
transportation problem is defined as one in which the total number of units

available at the supply origins equals the total number of items available at the
demand destinations. If these two values are not equal, the situation is referred
to be an imbalanced situation. It is necessary to first balance an imbalanced
transportation problem by establishing a fictitious origin or destination before
(c
attempting to solve it.

●● Unbalanced problems are commonly encountered in operations research while

Notes
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dealing with transportation challenges, when the overall supply does not meet the
whole demand for a certain service. Typically, the primary goal of a transportation
challenge is to identify the transportation plan that reduces total transportation
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costs while still fulfilling the needs of both supply and demand. However, in fact,
the issues that we are confronted with entail uneven situations in which the supply
and demand are not equally distributed
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●● Assuming that there are m sources of supply and n demand destinations in a
normal transportation issue, the test of optimality of any possible solution requires
allocating resources into independent cells in the number of cells equal to m + n
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– 1. In degenerate solutions, the number of allocations is less than the number of
allocations that are required by the problem.
●● To resolve degeneracy, the conventional method is to allocate an infinitesimally
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small amount e to one of the independent cells, that is, to allocate a small positive
quantity e to one or more unoccupied cells that have the lowest transportation
costs, in order to make m + n – 1 allocations (that is, to satisfy the condition N = m
+ n – 1) and thus to resolve degeneracy.
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●● Linear programming issues are connected with the idea of numerous optimum
solutions. In a linear programme having more than one set of fundamental
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solutions that may reduce or maximise the needed objective function, several
optimum solutions will emerge. The alternate fundamental solution is a term used
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to describe numerous excellent answers.
Glossary
●● Transportation Model: The transportation model addresses the concept of
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moving a thing from one place to another without change. It assumes that any
damage en route has negative consequences, and so it’s used to analyze
transportation systems and find the most efficient route for resource allocation.
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●● Northwest Method: The North-West Corner Rule is a method adopted to

compute the initial feasible solution of the transportation problem. The name
North-west corner is given to this method because the basic variables are selected
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from the extreme left corner.

●● Lowest Cost Method: The Least Cost Method is another method used to obtain
the initial feasible solution for the transportation problem. Here, the allocation
begins with the cell which has the minimum cost. The lower cost cells are chosen
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over the higher-cost cell with the objective to have the least cost of transportation.
●● Vogel’s Method: The Vogel’s Approximation Method or VAM is an iterative
procedure calculated to find out the initial feasible solution of the transportation
)A
problem. Like Least cost Method, here also the shipping cost is taken into
consideration, but in a relative sense.
●● Modified Distribution (MODI) Method: The Modified Distribution Method or MODI
is an efficient method of checking the optimality of the initial feasible solution.
(c
●● Unbalanced Transportation Problem: Unbalanced transportation problem is a

transportation problem where the total availability at the origins is not equal to the
total requirements at the destinations.

●● Degeneracy: A term referring to the fact that two or more stationary states of the
Notes
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same quantum-mechanical system may have the same energy even though their
wave functions are not the same
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●● Multiple Optimal Solutions: The multiple optimal solutions arise in a linear
programming problem with more than one set of basic solutions that can minimize
or maximize the required objective function. The multiple optimal solutions are
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called the alternate basic solution.
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1. For finding an initial feasible solution in transportation problem ____________
method is used.
a) Simplex
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b) Big-M
c) Least Cost Method
d) Hungarian
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2. For finding an optimum solution in transportation problem ____________ method is
used.
a) Simplex
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b) Big-M
c) MODI
d) Hungarian
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3. The transportation problem deals with the transportation of ___

a) single product from a source to several destinations
b) several products from a source to a destination
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c) single product from several sources to a destination

d) several products from several sources to several destinations
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4. In northwest corner method first allocation is made at

a) Lower right corner of the table.
b) Upper right corner of the table.
c) Highest costly cell of the table.
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d) Upper left-hand corner of the table.

5. One disadvantage of using North-West Corner rule to find initial solution to the
)A
transportation problem is that

a) It is complicated to use
b) It does not take into account cost of transportation
c) It leads to a degenerate initial solution
(c
d) It may provide wrong solution

6. When the total demand is equal to supply then the transportation problem is said to
Notes
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be ______________
a) balanced
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b) unbalanced
c) maximization
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d) minimization
7. The dummy source or destination in a transportation problem is added to
______________
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a) balance the transportation problem
b) prevent solution from becoming degenerate
c) ensure that total cost does not exceed a limit
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d) the solution not be degenerate
8. The solution to a transportation problem with ‘m’ rows (supplies) & ‘n’ columns
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(destination) is basic feasible if number of positive allocations are
a) m+n
b) m*n
c) m+n-1
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d) m+n+1
9. The maximization type of transportation problem can be converted into minimization
type ________
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a) by subtracting smallest cost element from all other cost elements

b) by adding smallest cost element to all other cost elements
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c) by subtracting the all the unit costs from the highest unit cost of the table.
d) by adding smallest cost element to all other cost elements
10. In applying Vogel’s approximation method row and column penalties are determined by:
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a) finding the largest unit cost in each row or column.

b) finding the smallest unit cost in each row or column.
c) finding the sum of the unit costs in each row or column.
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d) finding the difference between the two lowest unit costs in each row and column
Exercise
)A
1. What do you mean by Transportation problem?

2. What is Northwest Method
3. What is Lowest Cost Method
4. What is Vogel’s Method
(c
5. What is Modified Distribution (MODI) Method

6. What do you mean by Unbalanced Transportation Problem?

Notes
e
7. What is the solution to Unbalanced Transportation Problem?
8. What do you mean by Degeneracy?
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9. What is Degeneracy Resolution
10. What are Multiple Optimal Solutions
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Learning Activities
1. Construct a transportation model for Tata Ltd to find out the shortest route from Delhi
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to Mumbai
2. Based on Vogel’s method find the longest route between Delhi and Noida
Check Your Understanding - Answers
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1. C) Least Cost Method
2. C) MODI
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3. D) several products from several sources to several destinations
4. D) Upper left-hand corner of the table.
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5. B) It does not take into account cost of transportation
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6. A) balanced
7. A) balance the transportation problem
8. C) m+n-1
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9. C) by subtracting the all the unit costs from the highest unit cost of the table.
10. D) finding the difference between the two lowest unit costs in each row and column
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)A

(c

Module - V: Assignment Model

Notes
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●● Model of assignment problem
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●● Hungarian Method for solving assignment problem
●● Unbalanced assignment problem
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●● Restricted path problem
●● Multiple optimal solutions
●● Maximization assignment problem
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●● Restrictions on assignment
●● Travelling salesmen problem
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Introduction
An assignment problem is a type of transportation problem in which the resources
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(such as facilities) are assignees and the destinations (such as activities) are destinations
(say jobs). Given n resources (or facilities) and n activities (or jobs), calculate the efficacy
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of each resource for each activity (in terms of cost, profit, time, and so on). The difficulty
then becomes allocating (or assigning) each resource to only one activity (job) and vice
versa in order to maximise the stated measure of effectiveness.
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5.1 Mathematical Model of Assignment Problem

Introduction
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Because the available resources, such as workers, machines, and other

resources, have varied degrees of efficiency for completing different jobs, the problem
of assignment arises. As a result, the cost, profit, and time required to do certain
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operations vary. As a result, the issue becomes: how should the assignments be made
in order to achieve the provided goal?
Assignment of I people to machines, (ii) salesman to different sales regions, (iii)

clerks to various checkout counters, (iv) classes to rooms, (v) vehicles to routes, (vi)
m
contracts to bidders, and so on are some of the challenges where the assignment
technique may be effective.
5.1.1 Mathematical Model of Assignment Problem

)A
Table 5.1 shows the general data matrix for the assignment problem. This data
matrix is similar to the transportation cost matrix, with the exception that the supply (or
availability) of each resource and the demand at each destination are assumed to be
the same. It is as a result of this that assignments are given one-to-one.
(c

Resources (workers) Activities (Jobs) J1 J2… Jn Supply

Notes
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W1 C11 C12. . . C 1n 1
W2 C21 C22. . . C2n 1
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. . . . .
. . . . .
. . . . .
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Wn Cn1 Cn2 . . . Cnn 1
Demand 1 1 . . . 1 n
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Assume that xij denotes the assignment of resource (facility) i to activity (job) j in the
following way:
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r si
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j=1
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i=1
and xij = 0 or 1, for all i and j

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where cij represents the cost of assignment of resource i to activity j.
(i) Since the cost matrix is a square matrix and (ii) the best solution table
(matrix) for the problem would have only one assignment in a given row or column,
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this mathematical model of the assignment problem is a special instance of the

transportation problem.
)A
Assignment problem solution methods

Any of the following methods can be used to solve an assignment problem:
●● Method of enumeration
●● Method of simplex
(c
●● Method of transportation
●● Hungarian technique
1. Method of Enumeration
Notes
e
This strategy involves creating a list of all feasible assignments among the
available resources (personnel, equipment, etc.) and activities (jobs, sales areas, etc.).
in
Then an assignment with the lowest cost (or highest profit), time, or distance is chosen.
The problem has numerous optimal solutions if two or more assignments have the
same minimal cost (or maximum profit), time, or distance.
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When an assignment problem involves n workers/jobs, there are n! possible
assignments in total. For instance, in a case with n = 5 workers/jobs, we must evaluate
a total of 5! or 120 assignments. When n is big, however, the method is ineffective for
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manual calculations. As a result, this approach is only appropriate when n is small.
2. The Simplex Technique

As any assignment problem can be expressed as a 0 or 1 integer linear
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programming problem, the simplex approach can be used to solve it. The assignment
problem has n× n choice variables and n + n or 2n equalities in its general mathematical
model. There will be 25 choice factors and 10 equalities for any assignment situation
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involving 5 workers/jobs. Solving an issue like this by hand is challenging.
3. Mode of Transportation
Since an assignment problem is a subset of the transportation problem, the MODI
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method can be used to solve it. However, m + n – 1 = n + n – l = 2n – 1 assignments
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should be present in any fundamental possible solution of a general assignment issue
with a square matrix of order n. However, due to the problem’s unique structure, no
solution can have more than n assignments. As a result, solutions will deteriorate. To
proceed with the MODI technique, (n – 1) dummy allocations (deltas or epsilons) will be
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required to remove degeneracy. As a result of the degeneracy problem at each solution,

the technique for solving an assignment problem is computationally inefficient.
4. The Hungarian Approach

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The Hungarian technique (invented by Hungarian mathematician D. Konig) is

a quick and easy way to identify the best solution to an assignment problem without
comparing each one directly. The approach operates on the premise of converting a
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cost matrix into an opportunity cost matrix. The relative costs of allocating a resource
to an activity are represented by opportunity costs. To make optimal assignments,
the Hungarian technique decreases the cost matrix to the point where each row and
column has at least one zero.
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5.2 Hungarian Method for Solving Assignment Problem

Introduction
)A
The Hungarian approach, which consists of two parts, may quickly solve an
assignment issue. Row and column reductions are carried out during the first phase.
The answer is iteratively optimised in the second step.
1st phase
(c
Step 0: Take a look at the matrix you’ve been provided.

Step 1: If the number of rows in an issue does not match the number of columns,
Notes
e
or vice versa, create a fake row or a dummy column. For dummy cells, the assignment
costs are always set to zero.
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Step 2: Select the smallest element in each row and subtract it from the remaining
entries in that row to reduce the matrix.
2nd Phase:
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Step 3: Using the same manner as in step 2, reduce the resulting matrix column by column.
Step 4: Draw as few lines as possible to cover all zeros.
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Step 5: If the number of lines drawn equals the order of the matrix, you’ve arrived
at the best solution, so go on to step 7. If ideal results are not achieved, go to step 6.
Step 6: Find the smallest element in the whole matrix that isn’t covered by lines.
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Subtract this smallest element from all other elements that aren’t covered by lines, then
add the element at the line junction. Leave the single line covering the components
alone. Go to step 4 now.
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Step 7: Squaring any row or column with a single zero will allocate it. If there are
any lingering zeros in that row and column, strike them out (X). Repeat the procedure
until you’ve completed all of the tasks.
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Step 8: Make a list of the assignment’s outcomes and calculate the lowest cost/time.
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Hungarian method for solving assignment problem can be understood in seven stages.
5.2.1 Hungarian Method for Solving Assignment Problem

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The following stages summarise the Hungarian approach (minimization case):
Step 1: Create a cost matrix based on the situation. Add the needed number of
dummy rows or columns if the number of rows does not equal the number of columns.
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The cost element in dummy rows/columns are always zero.
Step 2: Locate the cost-of-opportunity matrix.

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(a) Find the smallest element in each row of the cost matrix and subtract it from each
element in that row;
(b) find the smallest element in each column of the reduced matrix generated from 2(a)
and subtract it from each element in that column. There is now at least one zero
element in each row and column.
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Step 3: Fill out the opportunity cost matrix with assignments. The following is the
technique for assigning tasks:
)A
(a) The first round of assignment creation

●● Continue identifying rows from top to bottom until you find a row with exactly
one zero element. Make an assignment to this single zero by circling it with a
square(). Then, in the relevant column, cross off (×) all other zeros.
(c
●● Identify columns with exactly one zero element that has not been assigned in
order from left to right. Make a square () around this single zero and then
cross off (×) any other zero entries in the associated row.
(b) Second round of assignment making

Notes
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●● If there are two or more unmarked zeros in a row or column and one cannot
be identified by inspection, assign the zero element at random.
in
●● Keep repeating steps (a) and (b) until one of the following circumstances occurs.
Step 4: Optimality criterion
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(a) If all zero entries in the cost matrix are either marked with a square () or crossed off
(×), and each row and column has exactly one assignment, the solution is optimal.
Adding the original cost elements in the occupied cells yields the overall cost
associated with this solution.
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(b) There is an alternative optimal solution if a zero element in a row or column was
chosen arbitrarily for assignment in Step 4(a).
(c) If there are no assignments in a row (or column), the total number of assignments in
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the square matrix is less than the number of rows/columns. Proceed to Step 5 if this
is the case.
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)A
Revise the opportunity cost matrix in step 5. Using the following approach, draw
a set of horizontal and vertical lines to cover all the zeros in the revised cost matrix
produced in Step 3:
a) Tick each row where no assignment has been made ()

(c
b) Look over the marked rows. Mark a tick () in the corresponding columns containing
zeros if any of these rows have any zero elements.

c) Look over the columns that have been marked. Tick () the rows containing assigned
Notes
e
zeros if any assigned zero elements are found in these columns.
d) Continue until there are no more rows or columns to mark.
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e) Draw a straight line from the top of each designated column to the bottom of each
unmarked row.
The present solution is optimal if the number of lines drawn (or total assignments)
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equals the number of rows (or columns); otherwise, proceed to Step 6.
Step 6: Create a new opportunity cost matrix that has been changed.
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a) Choose the smallest element in the matrix that is not covered by any line. This value
is referred to as k.
b) Subtract k from each matrix element that isn’t covered by a line.
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c) In the matrix covered by the two lines, i.e. the intersection of two lines, add k to every element.
d) Elements in the matrix that are covered by a single line do not change.
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Step 7: Reverse the steps.
Steps 3–6 should be repeated until an optimal solution is found.
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In the diagram above, the flow chart of steps in the Hungarian technique for
completing an assignment problem is depicted.
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Exercise 5.1 Three professional programmers work at a computer centre. Three
application programmes are being developed by the centre. After carefully reviewing the
programmes to be produced, the head of the computer centre estimates the computer
time in minutes required by the specialists for the application programmes as follows:
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Assign programmers to programmes in such a way that overall computer time is

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kept to a bare minimum.
Steps 1 and 2 are the solution. In rows 1, 2, and 3, the minimal time element is 80,
80, and 110, respectively. Subtract these components from the total of all elements in
their row. Table 10.2 shows the reduced time matrix (a).
m
)A
b)
(c

The minimal time element in columns A, B, and C of reduced Table 10.2(a) is 0,

Notes
e
10 and 0, respectively. To get the reduced time matrix, subtract these elements from all
other elements in their respective columns. Table 10.2 illustrates this (b).
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Step 3 (a) Examine each row one by one, starting with the first, until you find a row
with a single zero element. Rows 1 and 3 of Table 10.2(b) have only one zero in their
cells (1, C) and (3, A), respectively. As illustrated in Table 10.3, make an assignment in
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these cells and cross out all zero elements in the assigned column (a)
a)
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b)
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Now examine each column starting from A in Table 10.3(a). In the cell in column B,
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there is a zero (2, B). Fill in the blanks in this cell with the assignment indicated in Table
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10.3. (b).
(c) The optimal solution is reached since the number of assignments (= 3) equals the
number of rows (= 3).
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The following is a list of programmers’ and programmes’ assignments, along with

their relative time (in minutes):
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Exercise 5.2 A company’s department has five employees and five jobs to complete.
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The efficacy matrix shows how long each guy takes to do each task (in hours).
)A
(c
How should the jobs be distributed, one per person, to reduce the overall number
of man-hours?

Solution Table 10.4 (a) shows the decreased opportunity time matrix obtained by
Notes
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using Step 2 of the Hungarian algorithm
a)
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b)
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Steps 3 and 4: (a) Examine all the rows one by one, starting with A, until you find
a row with only a single zero element. In the cells (A, II), (B, I), and (E, I) of Rows A,
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B, and E, there is just one zero element (E, IV). As indicated in Table 10.4, make an
assignment in these cells and cross out all zeros in the allocated columns (b).
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(b) Now go through each column one by one, starting with column I. In column III, cell
A, there is a zero (C, III). This cell is where the assignment is made. As a result, cell (C, V)
has been crossed off. As stated in Table 10.4, all zeros in the table have been assigned or
crossed off (b). Because just four assignments are made, the answer is not ideal.
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a)
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b)
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Step 5: Fill in the zeros with the smallest number of lines (= 4) as shown below:
(a) In row D, where there is no assignment, mark ().

(b) Mark () columns I and IV, as these columns have no elements in row D.
(c
(c) Mark () rows B and E, respectively, because columns I and IV have an
assignment in those rows.

(d) Draw straight lines between the unmarked rows A and C and the marked
Notes
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columns I and IV, as illustrated in Table 10.5 because no other rows or columns
can be marked (a).
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Step 6: Create the revised matrix by using the lines in Table 10.5(a) to find the
smallest element among all uncovered elements, i.e., 2. Subtract k = 2 from uncovered
elements, including itself, and add it to elements 5, 10, 8, and 0 in cells (A, I), (A, IV),
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(C, I), and (C, IV), respectively. Table 10.5 shows the resulting improved matrix (b).
Step 7: To find a new answer, repeat steps 3–6. Table 10.6 shows the new assignments.
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The solution is optimal since the number of assignments (= 5) equals the number
of rows (or columns). The following diagram depicts the pattern of assignments across
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jobs and employees, along with their respective time (in hours):
Job Employee Time( in hours)

A II 5
B I
r 3
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C V 2
D III 9
E IV 4
Total 23
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Exercising 5.3 For their daily job, typists at a law office are paid on an hourly piece-
rate basis. There are five typists, each with a different charge and pace. According to an
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earlier understanding, only one typist was assigned to each assignment, and the typist
was paid for an hour’s worth of work, even if he only worked for a quarter of an hour.
Determine the least expensive allocation given the following information:
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Typist Rate per hour (Rs) No. of pages typed/ hour Job No. of pages
A 5 12 P 199
B 6 14 Q 175
C 3 8 R 145
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D 4 10 S 298
E 4 11 T 178
Solution Create a cost matrix based on the problem’s data, as shown in Table
)A
10.7(a), with entries representing the cost to be incurred as a result of one-to-one

assignment of work to various typists.
(c

Table 10.7
Notes
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A)
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B)
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Table 10.7 shows the reduced opportunity cost matrix using Step 2 of the Hungarian
technique (b). To make assignments in Table 10.7(b), look through all of the rows starting
with A until you find a row with only one zero element. In the cells (B, R) and (D, R),
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respectively, in rows B and D, there is just one zero element. Assign cells (B, R) first, then
cross out all zeros in the allocated columns as indicated in Table 10.7. (b).
Starting with column P, examine each column. In the cells (C, P), (E, Q), (E, S),
and (E, T), there is a zero in column P, Q, S, and T. (A, T). These cells are where
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assignments are made. As indicated in Table 10.8, all zeros in the matrix are either
assigned or crossed off (a)
Table 10.8
)A
(c

A)
Notes
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B)
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Since just four assignments are performed, the solution in Table 10.8(a) is not
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ideal. As a result, use the procedures below to acquire the next best answer.
(a) Due to the lack of an assignment, mark () row D.

(b) Column R should be marked () because it has a value of zero in row D.
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(c) Because column R has an assignment in row B, mark () row B.

(d) Because there are no further rows or columns to mark, draw straight lines through
the unmarked rows A, C, and E and mark column R as illustrated in Table 10.8. (a).
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Select the lowest element among all uncovered components using the lines (i.e.,
k = 2) in Table 10.8 to create the revised cost matrix (a). Subtract this element (k = 2)
from all uncovered elements, including itself, and add it to elements in the intersection
)A
of two lines cells (A, R), (C, R), and (E, R), correspondingly. Table 10.8 shows an
updated cost matrix as a result of this process (b).
To find a new solution, repeat the method. Table 10.9 lists the new assignments (a).
Table 10.9
(c

A)
Notes
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B)
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Since just four assignments are performed, the solution in Table 10.9(a) is also
not ideal. Follow Steps 6(a) through (d) of the procedure to draw a minimum number of
horizontal and vertical lines to cover all zero elements in Table 10.9 to acquire the next
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best solution (a). Table 10.9(a) shows the updated opportunity cost matrix created by
subtracting the smallest element (= l) from all uncovered elements, including itself, by the
lines and adding it to elements at the intersection of two lines is shown in Table 10.9(b).
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Table 10.9 shows the new answer achieved by repeating the technique as
previously described (b). As both columns Q and S have two zeros, selecting any cell
in either of these columns at random will yield an alternate solution with the same total
assignment cost.
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The following is the pattern of assignments and occupations among typists, as well
as the cost:
Typist Job Cost ( Rs)

)A
A T 75
B R 66
C S 114
D P 80
(c
E Q 64
Total 399

5.3 Unbalanced Assignment Problem and Its Solution

Notes
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Introduction
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The assignment problem is a sort of linear programming problem in which the
goal is to reduce the cost or time it takes for a group of people to complete a set of
tasks. “Given n facilities, n jobs, and the effectiveness of each facility for each task, the
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challenge is to allocate each facility to one and only one work in such a manner that the
measure of effectiveness is optimised (Maximised or Minimised).”
The larger component of the bipartite graph in the unbalanced assignment problem
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has n vertices, whereas the smaller part has r < n vertices. There’s also a constant
s, which is the cardinality of the graph’s maximum match. The goal is to find a size s
match at the lowest possible cost. The most typical example is when the graph allows
for a one-sided-perfect match (i.e., a match of size r) and s=r.
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5.3.1 Unbalanced Assignment Problem
An unbalanced assignment can be transformed into a balanced one. The simplest
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reduction is to add n-r additional vertices to the smaller section and connect them to the
bigger part with cost-free edges. This, however, necessitates the creation of n(n-r) new
edges. The doubling technique is a more efficient reduction method. A new graph G’ is
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constructed here by combining two copies of the original graph G: a forward copy Gf
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and a backward copy Gb. The backward copy is “flipped,” resulting in n+r vertices on
each side of G’. We need to add two types of connection edges between the copies:
●● Large-to-large: create a zero-cost edge from each vertex in the bigger section of
Gf to the equivalent vertex in Gb.
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●● If the original graph does not have a one-sided-perfect matching, add a very-high-
cost edge from each vertex in the smaller half of Gf to the equivalent vertex in Gb.
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Overall, no more than n+r new edges are necessary. The generated graph always
has a size n+r perfect match. In this graph, a minimum-cost perfect match must include
minimum-cost maximum-cardinality matches in Gf and Gb. The fundamental drawback
of this doubling technique is that when rn, there is no speed improvement.
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The unbalanced assignment problem can be handled without needing reduction by

directly generalising current balanced assignment techniques.
If the cost matrix is not a square matrix, i.e. the number of rows and columns are
not equal, the assignment problem is said to be unbalanced. We add a dummy row or
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dummy column with zero entries to make it balanced.
5.3.2 Unbalanced Assignment Problem Solution

)A
Unbalanced Assignment Problem occurs when the number of rows does not equal
the number of columns.
To overcome this problem, we must insert dummy rows or columns with a cost of 0
to make the matrix square.
(c

1st example
Notes
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Using the Hungarian technique, find a solution to your assignment challenge (MIN case)
Work/Job I II III IV
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A 9 14 19 15
B 7 17 20 19
C 9 18 21 18
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D 10 12 18 19
E 10 15 21 16
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Solution:
There are 5 rows and 4 columns.
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r si
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The presented problem is unbalanced, so add one more column to make it balanced.
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Step 1: Determine the smallest element in each row and subtract it from that row.
)A
(c

Notes
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Step 2: Determine the smallest element in each column and subtract it from that column.
r si
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+ Step 3: Fill out the opportunity cost table with assignments.
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(1) Column wise cells (A,J5),(B,J5),(D,J5),(E,J5) are crossed off because row wise
cell (C,J5) is allocated.
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(2) A cell (B,I) in each column is allotted.

(3) Since the column-wise cell (D,II) has been assigned, the row-wise cell (D,III)
has been checked off.
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(4) Each column’s cell (A,IV) has been assigned.

In the table, row and column assignments are shown.
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)A
(c

Step 4: There are 4 assignments and 5 rows in this step.

Notes
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As a result, the solution is not ideal.
+ Step 5: Cover the 0 with the fewest lines possible.
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(1) Due to the lack of an assignment, mark () row E.
(2) Mark () column J5 since it has a value of 0 in row E.
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(3) Mark () row C since it has an assignment in column J5.
(4) Since no other rows or columns can be marked, therefore draw straight lines
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through the unmarked rows A,B,D and marked columns J5
Mark not-allocated rows and columns with a checkmark.
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r si
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Step-6: Create a fresh revised table by choosing the smallest element from the
cells that aren’t covered by any lines (say, k = 1).
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Subtract k = 1 from every element not covered by a line in the cell.
In the intersection cell of two lines, multiply each element by k = 1.

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m
)A
(c


Notes
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Step-3: Make an assignment in the table of opportunity costs.
(1) Column wise cell (E,IV) has been checked off since row wise cell (A,IV) has
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been assigned.
(2) The cell (B,I) in the first row is assigned.
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(3) As row-wise cell (C,J5) has been assigned, column-wise cell (E,J5) has been
crossed out.
(4) Since column wise cell (D,II) has been assigned, row wise cell (D,III) has been
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crossed off.
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Step 4: There are 4 assignments and 5 rows in this step.
Step 5: Cover the 0 with the fewest lines possible.

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(1) Due to the lack of an assignment, mark (✓) row E.

(2) Mark (✓) column IV since it contains 0 in row E.
)A
(3) Mark (✓) column J¬5 because it has a value of 0 in row E.

(4) Mark (✓) row A since it has an assignment in column IV.
(5) Mark (✓) row C since it has an assignment in column J5.
(6) Draw straight lines through the unmarked rows B,D and marked columns IV,J5
(c
because no additional rows or columns can be marked.


Notes
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Step-3: Make a decision based on the opportunity cost. table
(1) Because row-wise cell (B,I) has been assigned, column-wise cell (C,I) has been
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crossed off.
(2) Column wise cell (E,J5) has been checked off since row wise cell (C,J5) has
been assigned.
)A
(3) Since the row-wise cell (E,IV) has been assigned, the column-wise cell (A,IV)
has been crossed off.
(4) Since column wise cell (D,II) has been assigned, row wise cell (D,III) has been
crossed off.
(c
(5) Cell (A,III) in column A is assigned.

Notes
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Step 4: Total number of assignments is 5, total number of rows is 5,
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Which is equal, so solution is optimal
The best assignments are

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Optimal Solution is
Work Job Cost
A III 19
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B I 7
C J5 0
D II 12
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E IV 16
Total 54
(c

Example 2:
Notes
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The machines must be assigned to four jobs. The following matrix shows how just
one job can be allocated to each machine.
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Jobs Machines
A B C D E
1 4 3 6 2 7
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2 10 12 11 14 16
3 4 3 2 1 5
4 8 7 6 9 6
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To reduce total processing time, discover the best way to assign jobs to the
machines and determine whether machines have no jobs assigned to them. How long
will it take to process all of the jobs in total?
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Solution:
The problem is unbalanced because the cost matrix is not a square matrix. We add
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a fictitious job number 5 with zero entries. Modified matrix.
A B C D E
1. 4 r 3 6 2 7
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2. 10 12 11 14 16
3. 4 3 2 1 5
4. 8 7 6 9 6
5. 0 0 0 0 0
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Steps 1 and 2: For each row and column, we subtract the smallest element from all
the other elements.
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A B C D E
1. 2 1 4 0 5
2. 0 2 1 4 6
3. 3 2 1 0 4
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4. 2 1 0 3 0
5. 0 0 0 0 0
Steps 3 and 4: Now we supply the zero assignment as usual and get the
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matrix below.
)A
(c

Notes
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However, the answer isn’t ideal because there are only four assignments.
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Step 5: In this step, we draw the smallest number of lines necessary to cover all zeros.
r si
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Work Job Cost

A The number ofIIIlines required to cover 19 all zeros equals 4 times the order of the
B I 7
matrix. By subtracting the smallest uncovered element I from the remaining uncovered
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C
elements and adding J5 to the element at the0point of intersection of lines, we get the 2nd
modified matrix.
D II 12
E IV 16
A B C D E
Total 54
1. 2 0 3 0 4
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2. 0 1 0 4 5
3. 3 1 0 0 3
4. 3 1 0 4 0
)A
5. 1 0 0 1 0
Step 6: Once more, Find the following matrix by repeating steps (3) and (4).
(c

Notes
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The total number of assignments (= 5) is equal to the number of rows or columns.
Then this is the best option.
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The following is the assignment pattern:
Job Machine
r1 B
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2 A
3 D
4 C
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There is no duty allocated to machine E, thus it is at its best (minimum)
Cost = 10 + 3 + 6 + 1
= Rs.20
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5.3.3 Restricted Path Problem

Restricted assignment problem example - quantitative techniques for management
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It’s conceivable that a given individual is incapable of doing certain tasks, or

that a specific job cannot be completed on a specific equipment. The solution to the
assignment issue should take these constraints into consideration in order to prevent
a limited (infeasible) assignment. This may be accomplished by assigning a very high
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cost (say ∞ or M) to the cells where assignments are forbidden, preventing this pair of
job-machine or resource-activity from entering the final solution.
)A
Example
Five guys will be given five tasks. The matrix shows the cost (in Rs.) of each
individual executing the duties. Job 4 cannot be completed by Man 1 and Job 3 cannot
be performed by Man 4 due to the assignment’s limits. Find the best work assignment
and the associated costs.
(c

Men 1 2 3 4 5
Notes
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1 16 12 11 x 15
2 13 15 11 16 18
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3 20 21 18 19 17
4 16 13 X 16 12
5 20 19 18 17 19
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Solution
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Assign large value to the restricted combinations or introduce ‘M’, see table.
Large Value Assignment to Restricted Combinations
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Reducing the matrix row-wise r si
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Reducing the matrix column-wise

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Draw minimum number of lines to cover all zeros,

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All Zeros Covered

)A
(c
Now, number of lines drawn = Order of matrix, hence optimality is reached.

Allocating Jobs to Men

Notes
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Job Allocation to Men
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Assignment Schedule and Cost
Men Job Cost

1 3 11
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2 1 13
3 5 17
4 2 13
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5 4 17
Total Cost = 71
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As per the restriction conditions given in the problem, Man 1 and Man 4 are not
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assigned to Job 4 and Job 3 respectively.
5.4 Multiple Optimal Solutions, Maximization A

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Introduction
Numerous optimal solutions and problems with linear programming are intertwined.
Several optimal solutions will arise in a linear programme with more than one set of
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basic answers that may minimise or maximise the required objective function. There are
many outstanding responses that are referred to as “alternative basic solutions.”
There are likely to be two or more ways to get rid of a given number of zeros in an
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assignment. We can see in this case that there are several optimum solutions, all with the
same optimal value of the objective function. So in an assignment scenario when there
are several allocations, the overall cost or total profit will be the same for all of them.
According to the simplex approach, several optimal solutions may be found in

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cases when a non-basic variable in the final simplex table indicates perfect solution and
net contribution is zero.
The decision maker will choose the most suitable set of the fundamental response
)A
as the linear programme solution if the issue has many optimal answers.
The availability of alternative answers does not prevent the researcher from
discovering one perfect answer to the problem, hence many optimal solutions are not a
serious concern.
(c


Notes
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In the case of an assignment problem, there are likely to be two or more ways to
eliminate a certain amount of zeros. Multiple optimal solutions with the same optimal
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value of the objective function are shown in this instance. As a result, in an assignment
situation, the total cost or total profit will remain the same for different sets of allocation.
The availability of many optimal solutions in the simplex method is stated by a
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condition in which a non-basic variable in the last simplex table displays the problem’s
ideal solution and the net amount of contribution is zero.
When a problem has numerous optimal solutions, the decision maker will use the
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most appropriate set of the basic answer as the linear programme solution.
Multiple optimal solutions are not a major issue because the presence of other
solutions does not prohibit the researcher from discovering one ideal answer to the problem.
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Although software such as MS Excel can be used to solve the linear problem,
it only delivers one best answer among many. When there is a chance of numerous
optimal answers, it is appropriate to solve the problem manually to obtain all of the
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basic solutions.
Example
Multiple Optimal Solutions r
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Consider the following assignment problem: The Spicy Spoon restaurant has four
payment counters. There are four persons available for service. The cost of assigning
each person to each counter is given in the following table.
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Job
Person 1 2 3 4
A 1 8 15 22
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B 13 18 23 28
C 13 18 23 28
D 19 23 27 31
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Assign one person to one counter to minimize the total cost.
Solution
After applying steps 1 to 3 of the Hungarian Method, we obtain the following matrix.
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Table
)A
(c
Now by applying the usual procedure, we get the following matrix.

Table
Notes
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The resulting matrix suggest the alternative optimal solutions as shown in the
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following tables.
Table
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The persons B & C may be assigned either to job 2 or 3.

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The two alternative assignments are:
A1 + B2 + C3 + D4 A1 + B3 + C2+ D4
1 + 18 + 23 + 31 = 73 1 + 23 + 18 + 31 = 73
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5.4.2 Maximization Assignment Problem
Maximization case in Assignment Problem

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There may be times when the assignment problem necessitates profit maximisation.
Solve this issue by transforming the given maximising problem into a minimization
problem by subtracting all of the components of the supplied matrix from the highest element.
)A
Example
Using the Hungarian technique, find a solution to your assignment challenge
(MAX case)
(c

Work/Job I II III IV
Notes
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A 42 35 28 21
B 30 25 20 15
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C 30 25 20 15
D 24 20 16 12
Solution:
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The number of rows and columns is equal to four.
O
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r si
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The problem is of the Maximazition type, thus subtract it from the maximum value
42 to make it a minimization problem.
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The problem at hand is balanced.

)A
Step-1: Find the smallest element in each row and subtract it from that row.
(c

Notes
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Step 2: Determine the smallest element in each column and subtract it from
that column.
r si
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Step 3: Fill out the opportunity cost table with assignments.
(1) Since row-wise cell (A,I) has been assigned, column-wise cells (B,I), (C,I), and
(D,I) have been crossed off.
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(2) The column-wise cell (D,II) has been assigned, hence the row-wise cells
(D,III),(D,IV) have been crossed off.
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)A
(c

Step 4: There are two assignments and four rows.

Notes
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(1) Due to the lack of an assignment, mark (✓) row B.
(2) Mark (✓) row C since it is unassigned.
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(3) Mark (✓)column I because this column has a value of 0 in row B.
(4) Mark(✓) row A since column I has an assignment in this row A.
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(5) Draw straight lines through the unmarked rows D and marked columns because
no additional rows or columns can be marked.
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r si
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)A

(c
(1) Since row-wise cell (A,I) has been assigned, column-wise cells (B,I),(C,I) have
been crossed off.

(2) As column wise cell (C,II),(D,II) has been crossed off, row wise cell (B,II) has
Notes
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been assigned.
(3) Since column wise cell (D,III) has been assigned, row wise cell (D,IV) has been
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crossed off.
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O
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r si
Step 4: There are three assignments and four rows.
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(1) Due to the lack of an assignment, mark(✓) row C.

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(2) Mark(✓) column I since it has a value of 0 in row C.

(3) Mark(✓) column II since it contains 0 in row C.
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(4) Mark(✓) row A since it has an assignment in column I.

(5) Mark(✓) row B since it has an assignment in column II.
(6) Draw straight lines through the unmarked rows D and marked columns I,II
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because no additional rows or columns can be marked.

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)A
(c

Notes
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(1) As row-wise cell (A,I) has been assigned, column-wise cells (B,I),(C,I) have
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been crossed off.
(2) Since column-wise cell (D,IV) has been assigned, row-wise cell (D,III) has been
crossed out.
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(3) As row wise cell (B,II) has been assigned, column wise cell (C,II) has been
crossed off. Therefore, row wise cell (B,III) has been crossed off.
(4) The cell (C,III) in the third row is assigned.
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Step-4: Number of assignments = 4, number of rows = 4
Because both are equal, the answer is the best.

(c
The best assignments are

Notes
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Optimal Solution is
Work Job Cost
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A I 42
B II 25
C
r III 20
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D IV 12
Total 99
5.5 Restrictions on Assignment; Travelling Sales

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Introduction
The ‘Traveling salesman issue’ is similar to the assignment problem, except that
in the former, there are additional constraints that a salesperson must start from his
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city, visit each city once, and then return to his home city in order to cover the shortest
distance (cost or time).
Procedure:
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Step 1: Approach the issue as if it were an assignment.
Step 2: Look for a whole cycle or other options. When the cycle is finished,
Continue to Step 4. If not, proceed to Step 3.
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Step 3: Complete the assignment by assigning the next least element other than
zero (only for the initial allocation). Continue to Step 2.
Step 4: Create the best assignment schedule and figure out how much it will cost.
)A
(Note: If the matrix has two non-zero values, it indicates that there are two optimum
solutions.) Calculate the costs of the two allocations and choose the most cost-effective option.)
There are occasions when a given resource (say, a person) cannot be assigned to
a specific activity in an assignment dilemma (say, a job). To deal with such a situation,
(c
we give it a very high cost (or time, or whatever else needs to be minimised) and
represent it as ∞ or M, where M denotes a very high cost. This is done to prevent this
pair of resource-activity from appearing in the final solution.
5.5.1 Restrictions on Assignment

Notes
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A limited assignment issue occurs when one or more allocations are forbidden or
impossible. We attribute “M,” which is an endlessly high cost, to such allocations. In M,
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there is no allocation.
The number of rows does not match the number of columns in an imbalanced
problem. Then, when needed, a fake row or dummy column must be introduced. For
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dummy, all values are zero.
As a result, in an imbalanced restricted issue, we will use dummy to balance the

problem and “M” to represent forbidden or limited allocations in the first table.
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Example:
To house one of its zonal offices, a corporation has rented the third floor of a multi-
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story structure. This floor has five main rooms, each of which is assigned to one of
five managers. Each area has its own set of benefits and drawbacks. Some have two
cupboards, others are closer to the washrooms or canteens, others are large and on
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different floors, and so on. Each of the five managers was asked to rank the rooms 201,
302, 103, 304, and 205 in order of preference. Their preferences were written down in
the table below:
Managers r
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M1 M2 M3 M4 M5
ROOMS 302 302 103 302 201
103 304 201 205 302
304 205 304 304 304
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201 205 103

302

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If some of the managers were dissatisfied with some of the rooms, the majority of
the managers did not include all five on the list. Assuming that their preferences can
be quantified, determine which manager should be allocated to which room in order for
their total preference ranking to be as low as possible.
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Solution:
Assign the first, second, third, fourth, and fifth preferences the ranks 1, 2, 3, 4, and
5. We assign to the cells for which there is no preference. As a result, the following
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assignment table can be used to represent the given problem:
201 302 103 304 205

)A
M1 ∞ 1 2 3 ∞
M2 4 1 ∞ 2 3
M3 2 5 1 3 4
M4 ∞ 1 4 3 2
M5 1 2 ∞ 3 ∞
(c
Let’s use the Hungarian approach to answer this assignment problem.

We receive what we want if we follow Steps 1 through 4.

Notes
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Now, because each row and column has only one assigned zero, the best
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assignment, i.e. the one that provides the most satisfaction, is made and given by:
M1 ® 302, M2 ®304, M3 ® 103, M4 ® 205, M5 ® 201.
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5.5.2 Travelling Salesman Problem
Consider the case of a travelling salesperson who is required to visit a particular
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number of cities within his allotted territory. He aspires to visit each city in his region
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once and only once before returning to the city from whence he began. He knows
the distances (or costs or times) between each pair of cities and wants to find the
tour schedule that is the shortest in terms of distance, cost, or time. The assignment
algorithm can tackle these types of problems. A travelling salesman problem differs
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from an assignment problem in that distinct destinations are assigned to different

sources in an assignment problem, whereas a destination is assigned to a source in
a travelling salesman problem. The destination is then assigned to another source, to
which we assign another destination, which is then assigned to another source, and so
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on. Let me use an example to further demonstrate this notion.
Example
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A travelling salesman, for example, must visit five cities. He wants to begin in one
city, travel to each city once, and then return to his beginning position. The following
table shows the travel time (in hours) between each city and a certain city:
To / From A B C D E
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A ∞ 5 8 4 5
B 5 ∞ 7 4 5
C 8 7 ∞ 8 6
)A
D 4 4 8 ∞ 8
E 5 5 6 8 ∞
What is the sequence of the salesman’s trips in order to reduce overall travel time?
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Solution: We may solve this problem using the Hungarian approach.

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As per the above assignment, the salesman should travel from A to D, D to B, B to
A, i.e., A ® D ® B ® A.
Since the salesman returns to A without visiting all of the cities, the above approach
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is not a complete solution to the travelling salesman problem.
As a result, we’ll proceed as follows:
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We introduce the next minimum non-zero element into the solution because the
assignment of zeroes did not yield a solution to the travelling salesman problem. As a
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result, we get the next best answer by adding 1 to the equation. We would have picked
the smallest, but more than 1, value from among all the table’s values if there was no
1 in any cell. We have 1 here, and it appears twice in this problem. One of these will
be chosen at random. Select cell (B, C) and draw a rectangle around the value in it,
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crossing off the zeroes in its row and column. For the assignment of zeroes, we now
use the Hungarian technique. As a result,
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Alternatively, we get
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In the case of the first alternative, the optimum assignment is A ® D ®A, but this is
not the solution of the travelling salesman problem.
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In the case of the second alternative, the optimum assignment is A ®E
®C®B®D®A
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Starting from A, the salesman visits all of the other cities before returning to A. This
is the whole solution to the problem. He needs at least 5 + 6 + 7 + 4 + 4 = 26 hours to
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travel to all of the cities.
Case Study
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Optimization of Personnel Assignment Problem Based on Traveling Time by

Using Hungarian Methods: Case Study on the Central Post Office Bandung
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1. Introduction
The transportation problem is a subset of the people assignment problem. It
appears in a wide range of decision-making scenarios. The personnel assignment
problem is distinguished by the fact that each worker is assigned to only one task.
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In general, the assignment problem entails assigning n jobs to n workers, each

of whom has varying levels of competency in executing each task. The goal of the
assignment problem is to assign each task to the most appropriate worker such that the
total resource expenditure to complete all tasks is minimised. An assignment price, time
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spent completing tasks, travel, and other factors can all be used to optimise a resource.
Many researchers have used assignment problems to help them address

)A
decision-making problems. Sasaki devised a novel technique to one-sided assignment

challenges. Maxon and Bhadury proposed a problem with repetitive work and
attempted to include a human factor in the research. Bogomolnaia and Moulin
developed a simple random assignment issue with a unique solution. For tackling
assignment problems, Nuass described a specific branch-and-bound technique.
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Sourd looked into the continuous assignment problem in order to solve scheduling
issues involving irregular cost functions. Odior et al. tackled the issue of the efficacy of
plausible solutions to assignment difficulties.

This study looks at how to solve a personnel assignment problem using the
Notes
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Hungarian technique. This optimization process was applied to a case study of the
central post office in Bandung in assigning employees to deliver packets to destination
locations based on several criteria owned by each employee, as well as conducting
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a sensitivity analysis of data changes that may occur in order to avoid changing the
optimal assignment from the original problem.
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2. Supplies and Procedures
The concept of an assignment problem based on journey time was used to address
a problem for a case study on the central Post Office in Bandung using Hungarian
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methodologies. Table 1 shows the data obtained (estimated time required in minutes)
from the central Post Office in Bandung.
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Table 1 displays the journey time of 10 employees delivering mailing packages to
ten post office delivery sites in Bandung: Cikutra (I), Padalarang (II), Ujung Berung (III),
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Dayeuh Kolot (IV), Asia-Africa (V), Soreang (VI), Situ Saeur (VII), Cimahi (VIII), Cipedes
(X), and Cikeruh (X) (X).
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3. Result and Discussion

The purpose of the task is to reduce the time it takes 10 employees to deliver
postal packets to 10 different post office delivery centres in Bandung. The number
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of workers is equal to the number of destinations, which is a key feature of this

assignment problem. The following is how it is explained.
●● A worker is allotted only one job.

●● Each worker is given one and only one destination.
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The management of the Central Post Office Bandung has ten workers for ten
different destinations, according to the data collected, and the travelling time of assigning
each destination to each worker is supplied. His goal is to assign each worker to a single
)A
destination, reducing the overall amount of time spent travelling for each assignment.
Problem with a balanced assignment: The number of workers and the number of
destinations are the same. In this example, the mathematical model of the assignment
problem is as follows:
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The optimal assignments matrix was created using the Hungarian approach in this
example, as shown in Table 2 below, based on the data in Table 1.
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The assignment of workers from Central Post Office Bandung to each post office
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delivery centre in Bandung is shown in Table 3 below, based on the optimal solution in
Table 2.
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The overall travelling time (T) is 387 minutes after changing the choice variables
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with the initial table (Table 1).
The sensitivity analysis was performed to determine the data modifications range
of trip time that do not modify the designated optimal worker assignment. Table 4 shows
the results of a sensitivity analysis to changes in the goal function coefficient based on
(c
journey time data.

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Table 4 shows that changing the range of coefficients in the objective function allows
each worker to arrive at the destination position without changing the initial assignment.
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4. Final thoughts
The notion of assignment problem was employed in this study to address a
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challenge for the central post office in Bandung, which had trouble assigning 10
personnel to 10 destination sites of post office delivery stations. The problem was
solved using the Hungarian Method, which was based on the data collected. For the
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central post office in Bandung, optimal case assignments were obtained. Workers from
Central Post Office Bandung were assigned to the following post office delivery centres:
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worker 1 to Soreang, worker 2 to Dayeuh Kolot, worker 3 to Ujung Berung, worker 4 to
Padalarang, worker 5 to Situ Saeur, worker 6 to Cipedes, worker 7 to Cimahi, worker
8 to AsiaAfrika, worker 9 to Cikutra, and worker 10 to Cikeruh. The total number of
cases with the best travel time is 387 minutes. The sensitivity analysis for assignment
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issues can show the range of coefficient value modifications for the authorised objective
function, ensuring that the optimal assignment of the initial problem is not affected.
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Question for case study

1. What did Bogomolnaia and Moulin developed?
2. How decision-making problems can be addressed using the above case?
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3. Write a precise type article based on your understanding of the case
Summary
●● An assignment problem is a type of transportation problem in which the resources
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(such as facilities) are assignees, and the destinations (such as activities) are
destinations (say jobs). Given n resources (or facilities) and n activities (or jobs),
calculate the efficacy of each resource for each activity (in terms of cost, profit,
time, and so on). The difficulty then becomes allocating (or assigning) each
)A
resource to only one activity (job) and vice versa in order to maximise the stated
measure of effectiveness.
●● This strategy involves creating a list of all feasible assignments among the
available resources (personnel, equipment, etc.) and activities (jobs, sales
(c
areas, etc.). Then an assignment with the lowest cost (or highest profit), time, or
distance is chosen. The problem has numerous optimal solutions if two or more
assignments have the same minimal cost (or maximum profit), time, or distance.

●● As any assignment problem can be expressed as a 0 or 1 integer linear

Notes
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programming problem, the simplex approach can be used to solve it. The
assignment problem has n× n choice variables and n + n or 2n equalities in its
general mathematical model. There will be 25 choice factors and 10 equalities for
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any assignment situation involving 5 workers/jobs. Solving an issue like this by
hand is challenging.
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●● The Hungarian technique (invented by Hungarian mathematician D. Konig) is a
quick and easy way to identify the best solution to an assignment problem without
comparing each one directly. The approach operates on the premise of converting
a cost matrix into an opportunity cost matrix. The relative costs of allocating
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a resource to an activity are represented by opportunity costs. To make optimal
assignments, the Hungarian technique decreases the cost matrix to the point
where each row and column has at least one zero.
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●● The larger component of the bipartite graph in the unbalanced assignment
problem has n vertices, whereas the smaller part has r < n vertices. There’s also a
constant s, which is the cardinality of the graph’s maximum match. The goal is to
find a size s match at the lowest possible cost. The most typical example is when
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the graph allows for a one-sided-perfect match (i.e., a match of size r) and s=r.
●● An unbalanced assignment can be transformed into a balanced one. The simplest
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reduction is to add n-r additional vertices to the smaller section and connect them
to the bigger part with cost-free edges. This, however, necessitates the creation
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of n(n-r) new edges. The doubling technique is a more efficient reduction method.
A new graph G’ is constructed here by combining two copies of the original graph
G: a forward copy Gf and a backward copy Gb. The backward copy is “flipped,”
resulting in n+r vertices on each side of G’.
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●● If the cost matrix is not a square matrix, i.e. the number of rows and columns are
not equal, the assignment problem is said to be unbalanced. We add a dummy
row or dummy column with zero entries to make it balanced.
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●● Linear programming problems are connected with the concept of numerous

optimal solutions. In a linear programme having more than one set of fundamental
solutions that can minimise or maximise the needed objective function, several
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optimal solutions will emerge. The alternate fundamental solution is a term used to
describe numerous excellent answers.
●● There are occasions when a given resource (say, a person) cannot be assigned
to a specific activity in an assignment dilemma (say, a job). To deal with such a
m
situation, we give it a very high cost (or time, or whatever else needs to be
minimised) and represent it as ∞ or M, where M denotes a very high cost. This is
done to prevent this pair of resource-activity from appearing in the final solution.
)A
●● A travelling salesman problem differs from an assignment problem in that

distinct destinations are assigned to different sources in an assignment problem,
whereas a destination is assigned to a source in a travelling salesman problem.
The destination is then assigned to another source, to which we assign another
destination, which is then assigned to another source, and so on. Let me use an
(c
example to further demonstrate this notion.

Glossary
Notes
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●● Assignment Model: Assignment models is one of topics of operations research. It
consists of assigning a specific (person or worker) to a specific (task or job) assuming
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that there are the number of persons equal to the number of tasks available
●● Mathematical Model: A mathematical model is a description of a system using
mathematical concepts and language. The process of developing a mathematical
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model is termed mathematical modeling
●● Simplex Technique: simplex method, standard technique in linear programming
for solving an optimization problem, typically one involving a function and several
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constraints expressed as inequalities.
●● Hungarian Approach: The Hungarian Method is based on the principle that if a
constant is added to every element of a row and/or a column of cost matrix, the
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optimum solution of the resulting assignment problem is the same as the original
problem and vice versa.
●● Opportunity cost: Opportunity cost is the forgone benefit that would have been
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derived from an option not chosen. To properly evaluate opportunity costs, the
costs and benefits of every option available must be considered and weighed
against the others
●● r
Unbalanced Assignment Problem: Unbalanced Assignment problem is an
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assignment problem where the number of facilities is not equal to the number of jobs.

1. An assignment problem is considered as a particular case of a
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a) Transportation problem
b) Sequencing problem
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c) Queuing problem
d) Game theory
2. The method used for solving an assignment problem is called
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a) Simplex method
b) Least cost method
c) Hungarian method
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d) Stepping stone method

3. Dummy row or column is added in an assignment problem
a) To balance total activities and total resources
)A
b) To prevent a solution from becoming degenerate

c) To reduce the total cost of assignment
d) To increase the profit function
(c

4. While solving an assignment problem, an activity is assigned to a resource with zero

Notes
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opportunity cost because objective is to ______
a) minimize total cost of assignment
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b) reduce total cost of assignment to zero
c) reduce cost of that assignment to zero
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d) maximize total cost of assignment
5. In an assignment problem_______
a) Only one activity be assigned to each resource
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b) Any number of activities can be assigned to each resource
c) It depends upon how many resources are available
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d) First activity is assigned to first resource
6. An assignment problem can be viewed as a special case of transportation problem in
which the capacity from each source is _______ and the demand at each destination
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is ________.
a) one; one
b) unlimited; one
c) one; unlimited
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d) unlimited; unlimited
7. In marking assignments, which of the following should be preferred?
a) Only row having single zero
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b) Only column having single zero

c) Only row/column having single zero
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d) Column having more than one zero

8. The assignment problem is always a ______________matrix
a) circle
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b) square
c) rectangle
d) triangle
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9. Maximization assignment problem is transformed into a minimization problem

by______________.
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a) adding each entry in a column from the maximum value in that column
b) subtracting each entry in a column from the maximum value in that column
c) subtracting each entry in the table from the maximum value in that table
d) adding each entry in the table from the maximum value in that table
(c

10. The assignment problem will have alternate solutions when ______________
Notes
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a) at least one zero in each row and column
b) when all rows have two zeros
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c) when there is a tie between zero opportunity cost cells
d) if two diagonal elements are zeros.
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Exercise
1. What do you mean by Assignment Problem?
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2. What is the mathematical model of Assignment problem?
3. What is the Hungarian Method for Solving Assignment Problem?
4. What is Unbalanced Assignment Problem?
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5. What is Restricted Path Problem?
6. What are Multiple Optimal Solutions?
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7. What is Maximization Assignment Problem?
8. What are Restrictions on Assignment?
9. What is Travelling Salesman Problem?
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Learning Activities
1. Analyse the Travelling Salesman problem of HP Ltd.
2. Conduct a study on the various methods used to solve an assignment problem and
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conclude which is the best possible practice to be used.
Check Your Understanding – Answers

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1. A) Transportation problem
2. C) Hungarian method
3. A) To balance total activities and total resources
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4. A) minimize total cost of assignment

5. A) Only one activity be assigned to each resource
6. A) one; one
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7. C) Only row/column having single zero

8. B) square
9. C) subtracting each entry in the table from the maximum value in that table
)A
10. C) when there is a tie between zero opportunity cost cells

(c


Notes
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3. Operations Research, MBA III-Sem (O.U) As Per the Latest CBCS Syllabus
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Module - II: Linear Programming 35

Structure of LP Model, Advantages, Assumptions and Limitations of LP Model

2.1.2 Allocation of Resources in LP

2.1.5 Assumptions and Limitations of LP Model

2.3 Graphical and Simplex Method for Solving LP Model

2.3.2 Simplex Method for Solving LP Model

2.4.1 Dual of LP Model

Module - III: Sensitivity Analysis 81

Module - IV: Transportation Model 113

4.1.3 Feasible Solution Methods: Lowest Cost Method

4.2.1 Optimal Solution: Modified Distribution (MODI) Method

4.3.1 Unbalanced Transportation Problem

4.4.2 Degeneracy Resolution

4.4.4 Maximization Transportation Problem

Module -V: Assignment Model 151

5.1 Mathematical Model of Assignment Problem

Module - I: Introduction to Operations Research (OR)

●● Concepts of Operations Research

“Operational research” is a word used by the British and Europeans, while

When mathematical and quantitative approaches are utilised to support a choice,

production requirements, to name a few examples.

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States when the war ended.

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1.1 Definitions of Operations Research, Features of

“Operational research” is a word used by the British and Europeans, while

abbreviated to “OR,” which is the phrase we shall use.

When mathematical and quantitative approaches are utilised to support a choice,

the OR process begins. A manager’s primary responsibility is to make decisions. We

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The instruments used in operations research come from a variety of disciplines.

1.1.1 Definitions of Operations Research

Meaning and Definition of Operation Research:

It is a process of analysis through which management obtains assistance in making

the sponsorship of military organs to provide quantitative information using scientific

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It was first used in the domains of manufacturing, commerce, agriculture, planning,

The operation research can be defined as:

“decision-making” by providing a quantitative basis for forecasting the most effective

examination of the situation, allowing management to make more informed judgments.

According to Moarse and Kimbal (1946) “OR is a scientific method of providing

Similarly, according to Dictionary of Military and Associated Terms US Department

According to Britannica Concise Encyclopedia, “OR is the application of scientific

industrial systems. It is characterized by a systems orientation, or systems engineering,

Amity Directorate of Distance & Online Education

In the same way, McGraw-Hill Science & Technology Encyclopedia defines OR

Important features of Operation Research

Rather of experimenting with numerous approaches, Operation Research believes

●● Administrative decision making

Non-profit organisations, such as non-governmental organisations, educational

make this proper decision selection.

●● Utilisation of Information Technology (IT)

arithmetic issues. This is since Operation Research’s decision-making technique is

It is a system approach, as the theoretical model of Operation Research

If just a small portion of a corporation benefits from Operation Research’s

While conducting business, a corporation must deal with a variety of challenges.

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1.1.3 OR and Its Approach to Problem Solving

research is to do preliminary computations. Operations research scores the effects of a

The use of operations research methodology aids decision-making in such